Four ways for women to close the gap

When it comes to money and wealth accumulation, women can be faced with a unique set of factors which can pose a challenge to financial empowerment, independence and confidence.

Furthermore, the impact of time spent away from the workforce while taking on a care role, and the potential flow-on career penalty, will not be the least of these.  

Gender-based financial inequity is, of course, a highly complex issue with a broad scope of potential contributory factors. Great efforts have been made in recent years to increase conversation, though challenges will likely continue to exist for some time yet. It remains true that women retire with substantially less in superannuation than their male counterparts, an imbalance which has broad social and economic consequences. In terms of financial action points, there are a few things one can consider for future impacts.

1. Re-thinking risk levels

Much has been written in various research illustrating that men and women can naturally display differing characteristic traits when it comes to investing. Women's generally more conservative and less risk-taking tendencies can result in a, sometimes, overly careful investment approach. This, in turn, can mean less stock market exposure within their superannuation portfolios than men. My observation advising clients over a number of years alone would, on average, largely support this. And when history tells us there is a relationship between risk and return, this tendency can have a major bottom-line impact over time.  

Accepting a degree of investment risk is an essential component of long-term asset growth. Put another way, there is ‘risk' in taking too little investment risk when it comes to achieving sufficient growth for a sustainable, comfortable retirement. While some of these cautious characteristics can certainly work in one's favour, superannuation's accessibility rules impose, for some, a natural long-term investment time horizon. This might therefore warrant a more measured approach to taking ‘risk' given that time may allow ups and downs to be ridden out, while remaining within one's comfort level.    

2. Long-term perspective

In her 2013 book Lean In: Women, Work, and the Will to Lead, American technology executive, activist, and author Sheryl Sandberg refers to women “drop[ping] out early in their careers because their salary barely covers the cost of childcare”. She goes on further to explain that while the decision to utilise childcare can be an extremely difficult one – with a possible range of considerations (both financial and non financial) – for professional women the cost component should be measured against her future earning capacity rather than her current income. And this is not to mention the investment already made up until that point, or the powerful compounding effect of employment superannuation contributions. The childcare cost/investment of today may indeed afford future reward, opportunity and flexibility down the track – particularly if leadership forms part of the career path. Sandberg also speaks of keeping the foot on the accelerator in the lead-up to starting a family so that when it comes time to make a decision, there is indeed a decision to be made.   

3. Getting 'in the know'

Education breeds confidence. When it comes to money matters, however, it is easy to feel overwhelmed by the number of interrelating factors that require our attention. Working with women of a range of ages, the recurring theme is not any lack of knowledge or understanding but moreso a lack of confidence when it comes to decision making. Confidence leads to participation, which in turn leads to better outcomes and lower-stress lives. The key to gaining confidence, however, is recognising that no one is expected to know it all – and a good handle on the cornerstone concepts goes an enormous way. Those include getting clear on factors like the workings of superannuation, budget management and base investment principles. Getting in the know, and importantly keeping in the know, on the central ideas will hold anyone in good stead for an empowered financial future.  

4. Keeping up contributions

Accumulating sufficient superannuation assets for a sound retirement may be one of the greatest financial challenges women face. The Association of Superannuation Funds of Australia's December 2015 research report indicates that in 2013-14, women aged between 60-64 had an average superannuation balance of $138,000 which was less than half that of males in the same age category. Further, 44 per cent of employed women worked part time in 2015-16, compared with 15 per cent of employed men, contributing to the disparity. Outside the compulsory superannuation guarantee, there are a number of avenues for contribution to super – for example, after tax and spouse contributions as well as the ability to access ‘catch up' allowances and the government co-contribution.  

While family life comes with considerable financial demands and competing financial interests, continuing to invest in superannuation simply should be a non-negotiable in order help to close the gap and minimise the financial impact of any time out of the workforce. With some forward planning and a sense of confidence, clarity over our financial future can be well within reach.

Carol Tawfik is a certified financial planner.