Four key financial lessons you sometimes only learn over time

Nowana Sobopha, Investment Analyst at Momentum Investments, shared four key lessons she’s learned on her personal financial wellness journey – and notes a few ways in which a woman’s investment approach may differ to a man’s!

1. Not investing/saving for retirement – from the very beginning

It is critically important to start saving for retirement as soon as you start working. For women, I believe this is especially important. We know that, still today, women often earn less than their male counterparts. But statistically, women also outlive men by several years.

Knowing both of these, it makes sense for women specially to start saving for retirement as soon as possible, to ensure they are able to afford their own healthcare and maintain a comfortable lifestyle, even if their partners have left.

Of course, this doesn’t just apply to ladies. One of the key things I always recommend is that people consider increasing their pension or provident fund contributions by at least a percentage point when they receive a salary increase. But this isn’t automatically done; you would need to speak to your human resources colleagues to arrange this.

2. Don’t leave your own financial status off your “worry list”

I often feel that, as women, we put the needs and futures of others at the fore and push our own needs to the bottom of the priority list. I’m sure that men sometimes do this too, especially when they are keen to take responsibility for their family and household.

Of course, it’s very important to worry about children, education, and saving enough to provide for your dependents. But, in doing so, it is critical that we don’t neglect saving for our own retirements. If we don’t have enough money in retirement, the very same children we constantly worry about will likely end up burdened with our care when we are elderly and retired.

People also often forget that medical expenses usually increase during retirement. Medical aid is expensive for the elderly – so we need to specifically plan to pay for it if we want to afford it on our own when we’re retired. Not doing this is effectively leaving this burden to our children to carry. Be sure to plan your finances properly in your retirement, so that all your children have to worry about is whose turn it is to host Christmas.

3. Debt and credit – don’t live beyond your means

I can’t say this strongly enough: everyone needs to avoid living off debt. A credit card should not be your go-to ‘account’ when you want to buy something you cannot actually afford. Rather learn to be patient and save enough money to purchase the item you need. Top tip: sometimes if you wait to save enough for an item, by the time you have enough to buy that item, it is on sale and you score even more!

4. Over-insuring for funerals: stick to one policy, and save the rest

I don’t know about other cultures, but as a black woman, I know that funerals are very important in our families and communities. It’s culturally important to ensure that our loved ones get a “dignified” send-off. And, given the importance that is placed on such an event, funerals are usually expensive affairs, because they need to accommodate (and cater for) the community at large.

Separate to the actual funeral event, part of African culture around funerals is to support the family throughout the period (not just on the day). In the days leading up to a funeral, as well as on the day, food plays a big role in comforting the family. It is considered “unAfrican” to let people leave without having had something to eat at your home, and it is also considered impolite to leave without accepting something to eat if it has been prepared for you.

All of this costs money, you often find people signing up for multiple funeral policies. But I strongly believe there is a better way to meet this cultural need than just taking out multiple funeral policies and hoping to have enough.

Having at least one policy will give you peace of mind in the event of an unexpected death, but why not put the money you would’ve paid towards premiums on more funeral policies, in an interest-bearing savings account? This way, your money doesn’t get “locked in” by a policy for an uncontrollable period of time. A savings account will allow you to keep the money for that, but you will be able to access it if something else arises that is more urgent at the time.

It (literally) doesn’t pay to be too financially conservative

Its good to be cautious when investing your hard-earned money – but you also need to know that you will need to take on a certain amount of risk if you want to grow your money. The risks you take can also be different at different ages: for young people, it is okay to consider more aggressive and riskier assets, such as equities, because if the market changes, they have time to correct their bad investments.

But I have noticed that women seem to be more cautious than men in many different aspects. Everything from car insurance, life cover and funeral cover premiums often come in at lesser rates for women than those quoted for men, and companies always attribute this to women taking fewer risks. Some might think this is good – but the same overly cautious attitude that is rewarded by insurers, can hold women back in their investment returns.

For mature women, especially those who are mothers and wives, or those helping extended families, the prospect of losing even a fraction of your savings is incredibly stressful, so the risky asset classes are terrifying. This is understandable, given the sacrifices that we make to save these funds, and that you most likely have very specific plans for. But, if you want to realise real growth on your money, you will need to move away from thinking that all risk is bad.

Sometimes it pays to take a page out of a man’s book, dive right in, and just believe it will work out! This is especially important if you have several years to go before retirement. Take a chance, ladies, and discuss your options with a financial adviser.