It’s no secret that Australian women come out behind men on the financial front.
We retire with close to half the savings of men (an average of $197,000 vs $105,000). We battle a persistent pay gap (14% in 2019), and are under-represented in the ranks of investors (31% of women invest in shares compared to 44% of men).
The reasons for this are complex and mostly structural. I’m a big believer in working to change the system, but we should also look at how we can improve our own money situation.
While writing about women and money over the last four years, a lot of women have expressed a sense of being outside the world of finance and investment. And no wonder – the finance sector is still dominated by men.
So I want women to rethink their relationship with money. I want them to feel empowered about making financial decisions for the long term. If I could sum it up, I want to see women stop making these three mistakes.
1. Selling yourself short
I’ve heard so many women say ‘I’m not good with money’ or ‘I don’t really get finance stuff’. But in fact, most women are fine with money management day-to-day; they just get put off by the men in suits talking about investments with lots of jargon.
The key to confidence is simply taking an interest. That’s why I started Fierce Girl Finance – I wanted to show women that financial education doesn’t have to be stuffy or scary.
That ‘if you can shop for clothes, you can shop for shares. And that if you can get the hang of applying fake eyelashes, you can get the hang of stock markets.
And so, I encourage all my ladies out there to rethink the story they tell themselves about money.
2. Not thinking big
Setting goals is key to success in any area – and money's no different. But beyond buying a home, we aren't encouraged to think about the big, hairy goals for building wealth.
When you speak to a financial adviser, one of the most powerful parts of the process is goal-setting. Yep – sitting down and discussing what you want to achieve.
But you don’t need an adviser to do this – you just need a notepad, a night at home and maybe a glass of wine!
If you commit to thinking about what you want to achieve with money – five, ten or fifty years from now – it will give you much more clarity about how to get there. And more importantly, show you that you can get there.
3. Thinking you need to be rich to invest
A lot of people underestimate the magic of compounding. Or to put it another way, they don’t realise they can get big returns from small amounts – especially if they start early.
Compounding means you earn returns on top of returns – or as I like to say, free money on top of free money. It’s hard to explain but easy to show in a diagram, generated by MoneySmart’s fantastic calculator.
If you start with $10,000, add $100 a month over ten years, it means almost half of the growth is generated by compounding (based on a 5 per cent return rate).
By allocating even a small amount to investing (or saving) over time, you can reap the rewards of compound returns.
The key is to realise 'it's never too early to start'. Although, it’s never too late either.
Belinda White is the founder of Fierce Girl Finance.
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