June 12, 2009
Are Singapore women money smart? No, say financial experts. They tell HONGXINYI that women here are too selfless in financial matters
American personal finance guru Suze Orman said in a recent interview with Urban that she was shocked by how often the women she counselled got into financial trouble for other people.
Guess what: It is not just an American problem.
Women are too selfless in money matters and only one in four have a fair idea of their retirement needs, say experts here.
From Filipino domestic workers to Singapore housewives, three experts Urban talked to echo this point: Many women find it difficult to put themselves first when it comes to managing their money.
Veronica Gamez, executive director of Aidha, a non-profit organisation that provides financial education to female migrant workers in Singapore, notes that even domestic workers who have been working here for over 20 years 'tend to join our programmes with no savings at all'.
'They send everything they earn back home,' she says. 'They feel very selfish if they don't do so.'
Mary Ann Geronimo, programme manager for the Citi-Tsao Foundation Financial Education Programme for Mature Women, notes the same tendency among the 250 Singaporean women aged 40 to 60 who were invited to be focus group participants by the foundation last year.
Despite their different races, family backgrounds and income levels, the common thread was that the women tended to save for others and not themselves.
'They give it away when relatives want to borrow money or when their children need to pay for university. The planning for their future is very vague, they prefer to leave it to fate and hope for the best.'
But hazy planning is dicey as the odds are stacked against them on several counts.
'Women in Singapore live at least 7.5 years longer than men and women have more debilitating diseases, like cancer, which requires long-term, expensive treatment,' says Geronimo.
'Preparing for these eventualities by being financially independent is very important.'
Women should also remember that they tend to earn lower wages than men partly because many women have shorter careers due to family commitments, says Lily Fang, assistant professor of finance at international business school Insead.
Recent data from the World Bank, for instance, notes that women in developing countries earn an average of 22 per cent less than men.
'Women tend to underestimate their financial needs,' says Fang, adding that they should start investing as soon as they land their first job.
Surveys show that even in developed economies, less than 25 per cent of women have a 'reasonably good idea of their financial needs in retirement', she notes.
Individual needs vary, but assuming you stop working at 65, live till 88 and need to spend $1,000 a month, you would need a nest egg of about $180,000 after factoring in things like inflation and returns on savings and investments, says Leong Sze Hian, president of the Society of Financial Service Professionals.
It is not all bad news, though.
As women tend to be more risk-averse in investing, they tend to hold more diversified portfolios, says Fang.
And because they are usually not ashamed to admit their lack of knowledge in investing, they make more willing learners.
Tenley Peterson, a volunteer with the Association of Women for Action and Research (Aware), notes that based on observations at a recent talk on money management organised by the group, 'young women tend to be more independent. They want to know what's going on with their family money and want equal input into how it is spent and invested'.
This shift is likely due to changing values and also the fact that couples are marrying later, she says.
'By the time they are married, women have been managing their own money for some time and are quite savvy about it.'
Younger women may also have a more me-first attitude towards money.
Living in a 'consumer culture' means women often feel they should reward themselves with perks like clothing for working hard, notes Gamez.
'This is short-term gratification,' she says. 'Women also deserve long-term security such as their own house and a safe retirement fund.'
10 FINANCIAL TIPS
1 Get a headstart
The earlier the better. Experts say that children should be taught to save once they are in primary school. Saving from young means being able to live off your savings when you are older, or you will have to re-enter (or never leave) the workforce in order to have a source of income. The years you spend not saving and investing effectively amounts to interest and dividends lost.
Individual expenses, assets and expectations vary, but you should be in relatively good shape if you can save 5 per cent of whatever cash that is left each month after paying all your bills and loans and debts, says Leong Sze Hian, president of the Society of Financial Service Professionals.
He also recommends getting a trustworthy financial adviser or friend who can guide you on the types of investments you are best suited for.
2 Clear all your debts
Make this a priority. There is no sense in saving or investing if you have credit card debts - they cancel each other out. Call Credit Counselling Singapore's hotline on 1800-225-5227 for assistance.
When clearing credit card debt, pay the full amount owed whenever possible rather than the minimum sum required so you will not be charged interest.
When it comes to housing loans, if you have enough surplus funds in your CPF to pay off your entire loan, go ahead, says Leong. If not, consider leaving enough in your CPF so that your housing payments will be covered should you be jobless for a few months.
3 Draw up a plan
Have a one-page financial plan that clearly states your goals, strategies and obstacles. Targets, in particular, are crucial. Studies show that financial plans are meaningful only if you write them down. Pin up your plan so that you can see it every day to remind yourself of the commitment you have made.
4 Share your financial goals
Tell them to your family, friends and colleagues so that they can support you. For instance, sign your financial plan in front of your family to formalise the commitment to your plan. Or start a savings club with a group of friends so you can all pledge to save a certain amount of money each month and keep one another on track when it comes to avoiding temptations and sticking to budgets.
5 File all your financial documents
The key ones should always be at hand and these include insurance policies, CPF statements, deeds to assets like property, wills and trusts and documentation of your savings and investments.
Bills should be kept for a year, says Mary Ann Geronimo, programme manager for the Citi-Tsao Foundation Financial Education Programme for Mature Women. Having an organised system means you are more likely to read the fine print in insurance policies and investment portfolios, rather than chuck unopened documents aside in a drawer.
6 Track all your expenses daily
Keep a little notebook in your purse to jot prices down. At the end of the month, tally how much you spent on various categories like food and entertainment. People often spend based on how they feel (like splurging on a lipstick if you have had a bad day). If you keep tabs on your daily spending, you will become more aware of how your emotions affect your spending and learn how to control this better.
7 Stash for a rainy day
Unexpected expenses will always crop up.
Have an emergency fund worth at least six months of your living expenses so that you will not be left high and dry if emergencies crop up.
8 Build in safety nets
The amount you have in your CPF and Medisave kitties will probably not be enough to cover medical expenses. Make sure you have other safety nets, such as a basic medical insurance plan that you can pay for with your Medisave funds and that will cover hospital bills in the event of health scares. Individual insurance needs will vary depending on your income and dependents, so discuss this with your financial adviser.
9 Be smart when you invest
Put money in things you understand, using only what you can afford to lose. Individual risk appetites and amount of cash available vary but, as a general rule, your investment portfolio should always be diversified enough to hedge against market fluctuations. For example, the proportion of stocks (while more volatile) should more or less balance the proportion of bonds (which are more stable).
Always consider the worst-case scenario: If all your investments are gone, can you still keep to the kind of lifestyle you are accustomed to?
10 Do not take on financial burdens you cannot bear
For instance, if your children are able to take out a study loan for their education, do not put your retirement fund at risk in order to pay for their school fees.