10 financial tips for women
By Lorna Tan
If you don’t have time to read through the whole article, you can check out our short version below
- Women generally live longer and the family coffers would usually have little left over after spending on the children’s education and husband’s medical needs.
- Do not let the fear of losing money or fear of the unknown deter you from investing.
- When a CPF member with high CPF balances transfers funds from his CPF to his spouse’s CPF account, the household will benefit from an overall higher interest income.
Having a clear understanding on how to manage our finances is important for everyone to achieve financial security and a peace of mind. As much as we would like to believe that financial planning is gender neutral, there is much that women can do to improve their monetary well-being and awareness of investments.
International Women’s Day – which celebrates the social, economic, cultural and political achievements of women – falls on 8 March. In addition, 2021 has been declared the Year of Celebrating SG Women to salute women's progress and potential across society, as their contributions are integral to the Singapore story. So, it’s a timely opportunity to address these vital money matters.
In the past decades, more women have been getting an education and entering the workforce. There are also more women holding management roles. All this harbours well for the fairer sex. With greater income potential, women now have the means to be financially savvy. Still, the journey to financial freedom starts with a plan. Financial planning allows women to map out their goals based on their present circumstances and future needs, as well as identify and close any gaps.
However, there are certain obstacles women may face, particularly those who take a break from their career to devote time to raising a family or be caregivers to the elderly. Studies showed that more women than men had at one point taken a career break. This could result in reduced opportunities for career advancement and lower lifetime earnings compared with their male counterparts. Furthermore, women generally live longer than males – on average by five to eight years - so planning is of paramount importance to ensure they do not outlive their nest egg.
Here are 10 financial tips for women.
1. A man is not a financial plan
It is prudent for a woman not to be fully financially reliant on any man. This is partly because women generally live longer and the family coffers would usually have little left over after spending on the children’s education and husband’s medical needs.
So be self-reliant on money management and continue to equip yourself with financial know how so as to make informed decisions.
Try to get over any fear of financial jargon by empowering yourself with financial knowledge on budgeting, credit management, insurance, investing and planning for long-term goals like retirement.
2. Be involved in your family’s financial planning
Some women prefer to take a back seat when it comes to planning the family’s finances, especially when their other half is more money savvy. Still, there is a need to avoid the situation where these women might be financially clueless if their spouses die before them. And some might be in for a rude shock if their spouses had not catered for the needs of surviving family members.
To avoid such undesirable situations, stay informed and be involved in your family’s financial and estate planning. Understand the money flows and what they are invested in. Discuss with your hubby to ensure that there is a financial plan that deals with liabilities such as the housing and car loans. Find out what are the money sources that will fund these loans and the provisions for family members, and who are the beneficiaries if the breadwinner dies prematurely. Common estate planning tools include a will, Central Provident Fund (CPF) nominations, insurance nominations, and the Lasting Power of Attorney.
Consider setting up a separate savings pool to fund your specific goals and ensure that you can maintain financial independence and quality of life regardless of what the future brings.
3. Shop smartly
When charging their purchases to a credit card, female shoppers will be doing themselves a favour by selecting one that is more aligned to their lifestyle. For instance, if they dine often, select a card that offers rewards points or cashback for dining. And if they enjoy travel, then aggregating air miles may work better for them. The idea is to gain as many benefits as possible from their transactions. For example, the DBS Woman’s Card offers special benefits to women which will complement their lifestyle.
Check on credit card promotions when you shop and dine. At all times, inculcate the habit not to overspend during shopping trips or shop impulsively online.
4. Use digital tools to set up a financial plan
A realistic budget can enable you avoid the pitfalls of spending unnecessarily or frivolous spend. The ongoing pandemic would have shown most people that it is possible to reduce discretionary spend when the need arises. Learning how to defer gratification can lead to increased financial rewards in the future.
Use the digital financial and retirement advisory tool NAV Planner to set up a holistic financial plan. It helps you monitor your cashflows, identifies gaps and offers customised tips and access to insurance and investments, as well map out your future retirement income streams, using your finances within and outside DBS, and in government schemes like the Central Provident Fund and Supplementary Retirement Scheme.
5. Build confidence to invest
Many people, including women, lack the knowledge and confidence to invest. Start by understanding the basics of defining your goals, setting aside an adequate emergency fund and understanding your risk profile before investing. At all times, ensure your investment holdings are diversified by keeping a balanced portfolio of cash and investments that suit your needs (a mix of equities and fixed income.
6. Explore investment options
Whether you are new to investing or experienced enough to do it yourself, take advantage of opportunities to cope with inflation, grow wealth and manage volatility.
Females are generally more conservative in their investment outlook because they take calculated risks and have a longer-term view for their investment and prefer fixed-income products which give them a return on a fixed schedule, such as fixed deposits and bonds. However, when they are empowered with financial knowledge, women can consider growing their wealth with equity-type investments.
7. Start investing
While women are generally more risk-averse compared with men, this caution – when correctly applied – makes for better decision-making when investing. But money parked solely in low-yielding savings accounts will be eroded by inflation.
Investing allows your money to work harder through the re-investment and compounding of dividends and returns. Learn and educate yourself on the various investment options and instruments. Find out what is suitable based on your risk profile and the available capital. Do not let the fear of losing money or fear of the unknown deter you from investing. Understand that investing requires calculated risk-taking to generate a higher rate of return. Ultimately, the investment journey should be aligned to your values and long-term financial plans and goals. You can start by investing in low-cost index tracking exchange-traded funds (ETFs) or funds. The DBS Invest-Saver is a good avenue for regular investing into ETFs and unit trusts from just $100 a month.
8. Invest with a long-term horizon
Instead of timing the market, which is usually difficult to get it right, take a long-term view while expecting volatility along the way. It is prudent to invest in tranches to reduce the average investment cost and stay invested to smooth out the effects of the market’s ups and downs over the long haul. Review your portfolio at least once a year and rebalance to align with changes in your investment goals and risk tolerance.
9. Prepare for the unexpected
Consider having adequate insurance plans and coverage that includes coverage of female-related cancers and other illnesses. As women tend to outlive men, ensure that you have adequate health coverage to take care of illnesses and long-term care Also, review and adjust coverage to prepare for rising costs of critical illness, disability and healthcare in retirement.
10. Topping up CPF account
If you have low CPF balances, your spouse can top-up your CPF Special Account (if you are below 55) or Retirement Account (if you are 55 and above) under the CPF Retirement Sum Topping-Up Scheme. This will enable you to maximise your CPF savings by enjoying the attractive interest rates of these accounts and have higher CPF LIFE payouts for life.
CPF members who are 55 and above receive an additional 1% extra interest on the first $30,000 of their CPF savings. This is on top of the 1% additional interest on the first $60,000 in CPF combined balances (with up to $20,000 from the Ordinary Account) which every CPF member regardless of age enjoys. When a CPF member with high CPF balances transfers funds from his CPF to his spouse’s CPF account, the household will benefit from an overall higher interest income.
CPF members can transfer their CPF savings to top up their spouse’s CPF accounts after setting aside the Basic Retirement Sum in their own CPF accounts. The maximum amount the recipient can receive depends on their age (prevailing Full Retirement Sum for those below 55 and prevailing Enhanced Retirement Sum for those 55 and above). For cash top-ups, the giver can potentially enjoy tax relief. Other family members like siblings and children can top up your CPF account too.
And if you are eligible for the Matched Retirement Savings Scheme, you will enjoy dollar-for-dollar matching from the government for cash top-ups made to your RA, for up to S$600 per year. That’s up to S$3,000 over five years from 2021 to 2025.
Ready to start?
Speak to the Wealth Planning Manager today for a financial health check and how you can better plan your finances.
Alternatively, check out NAV Planner to analyse your real-time financial health. The best part is, it’s fuss-free – we automatically work out your money flows and provide money tips.
This article is meant for information only and should not be relied upon as financial advice. Before making any decision to buy, sell or hold any investment or insurance product, you should seek advice from a financial adviser regarding its suitability.