Legal Talk: Financial tips for women to take control of their finances

Earlier this month, UBS Wealth Management published a whitepaper report, which revealed that, not only do 56% of married women leave investment and financial planning decisions to their husbands, but a whopping 85% of married women who stay out of long term financial decisions believe their spouses know more about financial matters.

Although this research focused on the financial beliefs and habits of women in the US, it is a sad reality that the situation in South Africa sees a similar trend. According to the Old Mutual Savings & Investment Monitor, which took a closer look at SA women and their finances in 2012, almost one in three women agreed that men were better at handling financial matters than women. In addition, the research found that 39% of respondents who had a partner agreed that they feared not being able to cope financially if their partner left them.

Take control of your financial affairs

For these reasons and more, it’s important that South African women take more control of their financial affairs. Here are a few tips to get started:

  • Pay yourself first. Before you do anything, pay yourself first. Do this by putting money away, in a savings or investment account, once you get paid and before you pay anything or anybody else. If you receive a salary and have a provident or pension fund at work, try and maximise your contributions to the fund each month. Do this as soon as possible so that compound interest can start working for you, even if it is a small amount initially. These small amounts can make you wealthy over time due to compound interest – something Albert Einstein called the “8th Wonder of the World”. Compound interest means your money earns interest on interest and it is the result of reinvesting your interest, or other returns, rather than having it paid out. Increase the amount you put away monthly by at least 6% (the rate of inflation) each year.
  • Knowledge is power. One powerful way of taking control of your financial affairs is by learning as much as you can about finances and investing. Subscribe to newsletters of personal finance websites, and, if you have the time, read business newspapers and magazines. There are numerous websites with calculators and financial tools where you can work out what you need for retirement, how long it will take you to pay off your debt, and whether you’re on track with your financial goals.
  • Set goals. It’s really important to set life goals for yourself so that you have something to work towards. Build a picture of your ideal future – a future where you have achieved these goals – and work towards making your dreams a reality. These goals can be anything from paying off your credit card to going on that overseas holiday, or putting down a deposit on a house, or being able to retire comfortably. You don’t have to have lots of money to achieve these goals – even a small monthly amount over a long enough time period can turn into hundreds of thousands of rands and help you achieve your goals.
  • Don’t do it alone. Make saving and investing something you do together with your friends and family. For example, a few years ago my friends and I started a stokvel by each contributing a few hundred rand per month, which we then invested. Not only did our money grow, we also learned more about how, where, and for how long we should invest. The stokvel also donated a third of its pool to a charitable cause each year, which made our money go even further in terms of helping other women and their families.
  • Make use of tax-free savings. Tax-free investments were introduced by the government as an incentive to encourage households to save. With these investment vehicles you don’t have to pay income tax, dividends tax or capital gains tax on the returns from these investments. You can contribute a maximum of R33 000 per tax year and there is a life time limit of R500 000 per person. These amounts can grow substantially over time and it’s all tax free, so it makes sense to make full use of this opportunity. Some examples of tax-free accounts include fixed deposits, unit trusts, retail savings bonds and certain endowment policies issued by long-term insurers.
  • Contact a financial adviser. Although you can, and should, learn as much as you can about personal finances, it may be a good idea to seek out the services of a financial advisor. A qualified advisor can help you with a holistic financial plan in terms of retirement and estate planning, tax planning, and your medical aid and insurance needs. Do research on a few financial planners in your area, or ask friends for recommendations, and then decide on three who you can “interview” to see who will be the best fit for yourself. Ensure that this individual is a Certified Financial Planner (CFP). This accreditation tells you that the advisor has the necessary experience, education and ethical standards to provide you with sound financial advice.

Roz Thomas

Managing Director

Hill+Knowlton Strategies South Africa