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What women should do with money in their 20s, 30s, 40s, and 50s

(Source: Getty)
(Source: Getty)

Women are being urged to challenge traditional thinking on how they ought to invest and manage money in their 20s, 30s, 40s and 50s.

Career breaks to have children and longer life expectancy are two complicating factors that contribute to many women being at a financial disadvantage, particularly when compared to men.

Kirsten Lynn financial adviser at Stanford Brown says women need to be careful about the life stage approach typically recommended by many superannuation funds, which involves taking greater risk when you’re young, and little to no risk as you approach retirement.

“Women should think about investing differently depending on their needs and goals at different times in their life.

“I wouldn’t follow a set course, but would suggest that women think about the purpose and timeframe for their investments.

“For long-term investments like superannuation, I wouldn’t necessarily advice a conservative approach when you retire. You want to preserve what you have and make sure it lasts.”

“Women are living longer and so by the time we’re getting into our 60s, we could easily have 30 years ahead of us.

“If your super isn’t enough for a comfortable retirement, it’s worth weighing up investing with a greater allocation to growth assets or working and contributing for longer,” she said.

So if women are to think differently about investing and money management, what should they be considering in their 20s, 30s, 40s and 50s?

Here’s some suggestions based on the experts interviewed.

20-something women

There’s so much opportunity for younger women today, including career and educational opportunities and new ways of investing, such as digital apps like the small change investment app Raiz and CommSec’s Pocket app.

Jun Bei Liu lead portfolio manager for Tribeca Alpha Plus Fund says when it comes to investing in your 20s, women should be thinking about growth assets, such as equities.

“If you have the skill set to buy individual stocks then you want to look for good quality companies.

“But trading is a very labour intensive task, so if you don’t have the skill or the time do to the research and be on top of price movements, then look for a fund manager who can help you.”

Kim Hughes Chief of QInvest at QSuper says women in their 20s should be trying to master some of the basics, including budgeting, saving and credit management.

“Maintaining a good credit profile may hold you in good stead later. Learn about insurance and understand how superannuation works,” she says.

5 top money and investment ideas for 20-something women

  1. Get financially organised. Consider the ‘pay yourself first’ principle. This is where you set a target amount of savings and treat it like mortgage/rent – that is rather than saving what’s left after spending, you spend what’s left after saving.

  2. Check your super investment option. If you’re unlikely to need your super for 40+ years you can have a high proportion in growth assets. A decline in value when the market corrects shouldn’t impact you because you’re not using this money.

  3. Savings. Create an emergency savings fund. Typically with the best interest rate you can get with the access you need. Create a savings buffer to cover 6 months worth of expenses.

  4. Investing. Once you’ve created a savings buffer and have additional money to invest consider looking at low cost and growth investment options such as shares and Exchange Traded Funds (ETFs) that can provide diversification.

  5. Property. If you want to save for a first home, create a savings account to do so and find out about incentives like the First Home Saver Super Scheme.

30-something women and career breaks

This is the phase when many women are climbing the career ladder and when they are more likely to start a family.

“In your 30s you should be looking for more of a mix between equities, fixed income products such as a mix of corporate and government bonds and property but still remain more skewed to higher growth assets,” says Liu, adding that some women may also want to reduce their risk exposure compared to in their 20s.

This is also a life stage where many people take on extra financial responsibilities, such as a home mortgage.

“Extra financial responsibility requires extra financial protection,” says Ms Hughes. “Ensure that in your 30s you review the amount of life insurance you need, and think about your estate planning.”

5 top money and investment ideas for 30-something women

  1. Invest. Even if it is small sum and even if it is just with an ETF, this the time to take control and look at growth investments but also consider diversification to manage your risk.

  2. Children. If kids or even more kids are on the cards, then planning for a career break, by topping up your superannuation, starting a baby fund or checking whether employer benefits on parental leave, can all make an impact on your future financial security.

  3. Your pay. Chances are in this age group you’ll experience a pay rise or bonus, so where possible consider automatically investing some of it. You could do something like 35% to super; 35% to investment; 30% spend. Also, ensure that you automatically increase savings with any pay rises

  4. Insurance. Re-check your insurances in and outside of super as your salary increases or if you change employers.

  5. Debts. This is the life stage when your debts are likely to get bigger, so it is important to remain on top of things such as credit cards and think about minimising non-deductible debts.

40s and 50s something women

Even if retirement is another 20 or 30 years away, given that most of us will be working until about 70 years of age, we need to be thinking about what we’re doing with our money and how best to make it work for us later on.

If you’re in your 40s, investing in growth assets should still be a focus and it may also be for women in their 50s depending on your circumstance and financial goals.

“When you are in your 40s, you could be thinking about salary sacrificing more of your pay to add to your superannuation, or taking advantage of spousal superannuation contributions,” says Ms Hughes.

“In your 50s, retirement may still be more than a decade or two away – which is a great time to be actively planning for it. Learn about transition to retirement strategies, spouse contribution transfers, and other tax-effective savings strategies.

“No financial plan is set and forget. Life changes, priorities change and the external economic environment changes. Ensure regular check ins of financial plans when you need to,” adds Ms Hughes.

5 top money and investment ideas for 40 and 50-something women

  1. Keep saving and keep investing but start to look more for income producing investments, as well as those that offer growth and diversification to offer protection from risk.

  2. Have a retirement plan. Consider how you plan to fund your retirement. Is it cashing in your super, drawing an income stream from super or other investments. Or are you likely to rely on the aged pension? If you don’t have a plan, start one.

  3. Boost your super by making use of the various tax effective strategies discussed above.

  4. Protections. Re-check insurances because you may not need as much if your children are becoming independent. Also make sure you have an updated Will and Power of Attorney in place.

  5. Get real. If you like many Australians are unlikely to retire with enough to fund a comfortable retirement, then do your math on working for longer and including the aged pension if you are eligible.

Bianca Hartge-Hazelman is a women’s money columnist and founder of Financy and The Women’s Index.

The inaugural Yahoo Finance All Markets Summit will be held on the 26th of September 2019 in the Shangri-La, Sydney. Check out the full line-up of speakers and agenda for this groundbreaking event here and buy tickets here.

The inaugural Yahoo Finance All Markets Summit will launch on September 26 in Sydney's Shangri-La.
The inaugural Yahoo Finance All Markets Summit will launch on September 26 in Sydney's Shangri-La.