More women have entered the workforce than ever before, are setting up their own businesses and earning higher than before. However, the one area where women lag behind, even today, is financial literacy.
As per the Standard & Poor’s Ratings Services Global Financial Literacy Survey 2015, 80 percent of women in India lack awareness or are illiterate when it comes to finances, as compared to 73 percent men.
With money and investments often looked at as a male domain, women tend to leave financial planning to the male members of the house. Further, despite managing household budgets, women do not take active part in financial planning.
A major reason for this is that, traditionally, women have not been active in wealth generation. They are also known to be more aware of risks and hence, not keen on going beyond traditional means of saving and investing.
Shifali Satsangee, CEO and Co-founder, Funds Vedaa, adds that even the advisory space is male dominated, with women accounting for just 10 per cent of the total SEBI-registered investment advisors.
Various factors also affect a woman’s financial decision-making power: Whether she comes from a conservative background or a modern mindset background, if she is working or non-working, if she is from a nuclear or a joint family, etc.
“I have observed that women in joint families usually do not have much say in decision making while in nuclear families they do, to a certain extent. A conservative environment leads to the non-inclusion of women in any financial decisions, while a modern mindset in a family leads to combined decision making,” Satsangee explains.
This makes it even more important for women to focus on the one major money advice that few give – the need to be financially conscious about savings and avenues of investment.
What is financial consciousness?
Financial literacy is the basic know-how of making effective and judicious financial decisions and of being aware of the trade-off between spending, saving and investing. Further it encompasses being cognisant of the various investing avenues available to deploy the money saved.
“It isn’t a single ingredient, but a brew of factors that are essential for any impactful evolution. No matter what the recipe, one key ingredient in any endeavour is Consciousness. The ability of a person to affect their own financial outcomes, along with being mindful about what truly makes them happy, is Financial Consciousness,” Satsangee explains.
According to her, financial consciousness stems from the following building blocks:
• Financial Willingness
• Financial Capability
• Financial Security
Unfortunately, women tend to take a backseat when it comes to the above three.
Why should women be financially conscious?
Money management is a core life skill that empowers one with the ability to make independent financial decisions and lead a financially healthy life.
With women often outliving men, it becomes imperative for them to be financially wise. According to Satsangee, for married professional women, it is important to not overlook a vital component of any relationship - financial compatibility. “Marriage is all about the partnership which also extends to money management, combining finances and sharing financial responsibilities,” she explains.
Financial planning becomes even more indispensable for single women, (be it women who have delayed marriages, get separated, divorced or widowed), who are solely responsible for their finances.
Moreover, women have a high Emotional Quotient (EQ) which can influence their investment decisions. While this makes them more disciplined, committed and more cautious than men in saving money and look for security, they also tend to remain focused on the future and are better at long term planning. “Women investors also tend to focus on detailed reviews,” she states.
Satsangee adds that women are more risk-aware than risk-averse. “Women tend to be good savers but poor multipliers of money because they tend to focus more on conservative asset classes like gold and FD. However, off late, they have started moving towards investing in financial assets like mutual funds through SIPs.”
Money tips for wealth generation:
Viraj Nanda, CEO of Globalise, a guided global investing platform that allows Indian investors to access and invest in US Stocks, emphasises on looking at new avenues of investing to diversify one's portfolio and become a wealth creator. “Well, it is interesting that for the money of a MAC lipstick (Rs. 1500), you can start investing in the Estee Lauder stock through fractional investing and own a piece of the real pie,” he says.
Through fractional investing, you can purchase a portion of a single share, rather than the whole share. This will allow investors to distribute investments among several stocks to achieve a more diversified portfolio, regardless of the share price.
Here are some tips that Satsangee provides for women to realise their true financial potential:
Follow a goal-based investment approach by earmarking SIPs to each goal
Create a contingency fund
Route savings into tax efficient instruments
Create a safety net with health/life insurance plans, critical illness covers for a secure financial future
De-risk the portfolio by spreading investments into different asset classes so that a solid corpus is created for the family, year on year.
Adopt goal-based investing, investing patience along with investing money, staying away from predictions and cultivating long term thinking
Keep your financial records organised and safeguard your financial documentation-such as property documents, insurance documents, pan card, etc.
Be tech-savvy and comfortable with technology.
Diversify across asset classes and across styles of investing. Diversification helps you to neutralise the inherent volatility which each asset class carries, helps in mitigating risks and helps one to manage risk better. So spread investments across physical and financial assets for a better risk-reward ratio.
While investing, consider the risk-reward tradeoffs and invest according to your risk profile. Understand the product before investing.
Remember that financial planning is a holistic whole life process and not a one-time fix. One needs to keep revisiting the budget, plan, review, refine it as one navigates through the life cycle to suit ones changing needs.
Satsangee adds that women who are beginning their investment journeys can refer to the various wealthtech platforms that pool advisors and investors on the same platform for convenience. LXME - an advisory platform dedicated to women investors, Femwealth, a financial investment platform for women, Fintso – an aggregator platform for advisors, investors, sub-brokers which has also tied up with NSE academy to upskill the financial knowledge among advisors, and HerMoneyTalks, a financial platform for women, are just a few of the platforms dedicated to women.
"The good news is that with an increase in conversations on women’s financial literacy, many startups are stepping forward to bridge the gender gap and democratise the wealth management industry," she concludes.