Women need to keep developing money skills to enjoy a comfortable retirement...

These days there’s a lot more awareness of the disparity between opportunities and salaries of women and men in the workplace.

While women are often at a disadvantage from the beginning of their careers 1, they also tend to spend more time away from work to have children and care for their families.

It’s about more than saving 

Women can be very good at saving. A financial literacy survey by the Australian Government found that women are highly confident in their saving habits 2. But they can be less confident when it comes to investing.

Women need to seek financial advice and make sure they’re making the most of their income and their time in the workforce—and a focus on investing can help build long-term wealth.

Women are closing the gap

Not only are women generally paid less than men but the average full-time working woman earns 17.6 per cent less than a man 3 over time. The good news is women’s super balances are on the rise.

In the 12 months to June 2015, women with superannuation had an average balance of $101,900 compared to the men’s average of $158,100. 

That means women have about 64.5% of the average male balance although it’s only around a decade ago when the average woman had just 57.6% (2005) 4. 

How to build financial literacy

Every woman can do more to increase her financial literacy and be better off in the long term—consider our top tips.

1. Change your thinking - Ask yourself whether you expect to be comfortable in retirement and what proactive steps you’re taking today.

If you don’t have a strategy that goes beyond day-to-day budgeting, seek financial advice and gain a clear understanding of the opportunities you have to build investments and long-term wealth.

2. Aim for a specific super balance - Super is one of the most tax-effective environments for building long-term wealth so it’s worth paying attention to today. Set a dollar amount for your super balance and then use specific strategies―like salary sacrifice―to grow your super.

And make sure you’re not losing super money in extra fees. Get your super sorted today—it’s easy to consolidate your super and find any you may have lost along the way. Contact Us to help you do just that.

3. Establish a budget and invest - We can discuss your budget and work out where you’re spending your money. Then it is easy to organise and plan your spending or set up automatic deposits so your living expenses are taken care of. 

Then you can work towards setting money aside for additional investing outside of super. By investing a little amount on a regular basis you can make a very big difference to what you end up with.

4. Seek advice - If you’re considering investing in your future, speak to one of our advisers so you can plan ahead and set up an investment strategy to help you reach your goals—and above all, enjoy a comfortable retirement.

1 "Not only are women paid less than men but statistics show that female graduate salaries are about 90 per cent of equivalent male graduate salaries"--www.wgea.gov.au/sites/default/files/2013-04%20-%20Stats%20at%20a%20glance_0.pdf.
2 Financial literacy, Women understanding money (pp2), Australian Government Financial Literacy Foundation.
3 Gender workplace statistics at a glance, Australian Government Workplace Gender Equality Agency.
4 Super gender gap large, but closing, Financial Standard.

Source: www.amp.com.au

We've all been there: stuck in crawling, grid-locked traffic, when all of a sudden the lane next to you starts moving and the car beside you surges ahead and disappears from view....

Your first instinct is probably to work out how quickly you can get into that fast moving lane and shave minutes off your travel time. You carefully time your move so you slip into an emerging gap in the traffic, then power past the other motorists who don't possess your superior driving and anticipation skills.

Only that's not how it works.

Some time-tested research from North America suggests the phenomenon of identifying a 'faster lane' in traffic is generally an illusion. That is, if you see cars moving in the next lane while you are stationary, your mind will perceive that the next lane is moving faster, when in fact the average speed of both lanes is the same.

The work from the University of Toronto instead says that, while changing lanes can give you a short burst of acceleration, you won't necessarily get there any faster. A car you overtook a few minutes ago might come puttering up beside you further along the road.

With investing lane changing is akin to performance chasing. You might see certain shares or asset classes surge ahead in the performance fast lane, while the value of your investments seem stuck in first gear. A friend or colleague might have shared a winning investment that leaves you having feelings of regret.

But just like driving in congested traffic, investors who aim to time the market and make their move to beat all the other 'slow moving' investors have the odds stacked against them. Tomes of investment research show that there are no sure-fire 'fast lanes' that will deliver you to your investment destination in a shorter amount of time than if you stick to an asset allocation designed to meet your long term goals.

Consider well-reported research into the decisions of more than 3000 US institutional pension plans who fired under-performing managers and switched to higher performing managers.

Remember these are large, sophisticated investors with plenty of technical decision-making support.

Yet the research by academics Amit Goyal and Sunil Wahal published in 2008 found that following termination the fired managers actually outperformed the managers hired to replace them by 49 basis points in the first year, 88 basis points over first two years and 103 basis points over three years.

So your best bet is to focus more on your destination than your journey and take a long term view of your investments. Stay in the same lane, stick to your investment strategy, and you are likely get there in your own time. 

And just as changing lanes can involve an element of higher risk so too can looking for a 'faster' investment option present new risks not least of all the costs that come with changes to your investments, whether it be brokerage fees, buy/sell spreads, capital gains tax, etc. 

The more you change 'lanes' when investing, the more of these costs you incur, and the more likely you are to make a human error, miss your timing and end up in a worse position.

It doesn't matter if you're sitting in traffic or investing: sit tight, stick to your chosen lane and remember that you're not missing out on a faster course to your destination.

Source: Robin Bowerman for Vanguard Australia