Solving the Women’s Financial Conundrum
Personal finance
Solving the Women’s Financial Conundrum
Tuesday 08 March 2022
Summary
- No one can dispute the very important role a woman plays in a household as a wife or mother or simply single.
- Women have gone from being pure housewives to more working women than ever before.
- Although more women have joined the labor force, they still account for only 36% of formal sector employment in Kenya.
Today, as we celebrate International Women’s Day, we warmly salute all the women in our lives and around the world. Women are the foundation of our society and we applaud them for their abundant selflessness and compassion.
No one can dispute the very important role a woman plays in a household as a wife or mother or simply single. Women have gone from being pure housewives to more working women than ever before.
But despite having greater financial discipline and better savings habits than men, women still tend to lag behind their male counterparts in most financial metrics. What financial risks do women today face? What can they do to improve their situation?
Although more women have joined the labor force, they still account for only 36% of formal sector employment in Kenya. According to the Zamara database, on average, women are paid around 14% less than men.
Although this gender pay gap is narrowing, equal pay is unlikely to be achievable for some time. Women also take career breaks to give birth and raise children and are more likely than men to quit their job to care for a family member. More women are likely to work part-time than men.
When women take career breaks to give birth and raise children, they sacrifice the momentum they have gained from working in their careers.
Thus, on the whole, women suffer from lower earnings in comparable occupations and a shorter working life with frequent job interruptions. All of these factors have an impact on their financial security and future well-being.
Furthermore, the level of financial literacy is a key determinant of financial independence and, in particular, the empowerment of women. Evidence suggests that women have consistently lower rates of financial literacy than men.
According to the Global Index Report, women in developing countries, such as Kenya, are 20% less likely to have a bank account at a formal financial institution and 17% less likely to borrow.
Even for women with careers, their income is often seen as supplementing their husband’s income and they are expected to take on all domestic responsibilities as well. Surveys also show that less than a third of women have the confidence to invest their money properly.
Lack of financial literacy can lead to a number of problems for women, such as not being able to manage money well, making poor financial decisions and falling prey to inappropriate advice. Even though women’s savings groups have a success rate of over 90%, only a small percentage of these women are able to increase their existing wealth and become upwardly socially mobile.
But even worse, many women sometimes find it difficult to leave abusive marriages or relationships because they are not financially independent. Hence the importance for women to acquire the financial know-how to manage money and participate in the problems related to the money of their families, whether they work or not.
Women who reach the age of 60 are expected to live more than three years longer than men who reach the same age. Additionally, older women in Kenya are more than twice as likely as their male counterparts to live alone.
Consequently, they must have accumulated a higher retirement capital than men and face additional medical costs.
By way of illustration, a woman aged 60 generally needs around 15% more than a man of the same age to ensure the same pension for the rest of her life. From the Zamara database, we find that the average woman’s retirement account is almost 20% lower than the average man’s equivalent retirement account.
Therefore, it is important for women to save more for retirement to achieve a reasonable level of retirement benefits. As an indication, women must save 16% of their salary for 35 years to obtain an adequate pension, while men must save 13.8%.
Since women interrupt their careers to procreate and take care of their children, it is important to plan the period of work stoppage and to compensate for the loss of savings during the working years.
Even more critical: don’t spend retirement savings and make a concerted effort to make up for the non-contributory period by contributing even more than the previous amount.
For the housewife, the contribution of a stay-at-home mother in raising the children and managing the home is invaluable and as important as a husband who earns a living.
However, not earning a salary leaves the stay-at-home mom with no way to save for her retirement and she is completely dependent on her husband for financial support.
This level of financial dependence on a spouse can lead to great difficulties later in the event of divorce or death where the woman is generally not informed of her rights to benefits.
Due to these challenges, fewer resources and a lack of planning, women are even more vulnerable to old age poverty and are forced to depend on family or government support for their living expenses.
So how can women change their financial trajectory? Women’s financial literacy must be the top priority. Taking the initiative to learn about financial matters is essential.
Every woman can improve her financial well-being by making a financial plan and seeking the right financial advice on savings, investments, and personal and family insurance.
These days, there is a lot of information and resources online for women who want to educate themselves.