Women tend to be more conservative in their approach towards financial well-being. Lack of confidence, financial illiteracy, age old male dominance and scantiness of time has led women to believe that they are inferior to the male counterparts. Here are some of the common mistakes that women make with their money.
- Not Investing
According to Global Wage Report 2018-19 published by International Labor Organization (ILO), women are paid most unequally. On average, women are paid 34% less than men in India. While savings are less, the cost of living and the rate of inflation apply similarly to both. All the more, the life expectancy of women is higher as compared to men. This means women require a larger corpus to fund their retirement needs. Thus, being too conventional about investing not only eats into the returns but also has a more negative impact on the value of retirement corpus.
- No Active Participation
Although most of the women are money managers and budgeting experts at home, when it comes to investing, the onus on making financial decisions is put on their spouses, fathers or relatives. In majority of the cases, women have no knowledge of the investments made by their counterparts on behalf of them and are left clueless after the passing of any unfortunate events (divorce, untimely death, etc).
- Procrastinating investment decisions
When it comes to finance, when one starts investing matters more than how much one is investing. In the example given below, Ms. Early started her investment journey with a mere contribution of Rs. 50 thousand annually, whereas Ms. Late shied away from it initially but started her investment journey with thrice the amount later. At the end of the term, the cost of procrastination for me Ms. Late amounted to an approximate value of Rs. 12 lakhs.
- Financial Illiteracy
As per a report by Global Financial Literacy Excellence Centre, Indian women have scored second lowest on the financial literacy ranking of G20 countries. Instead of educating themselves on money matters, women tend to transfer the responsibility to the men in their family; they find the task very intimidating. There is a mind block when it comes to investing or understanding different financial products.
- Choosing Investment Products
Managing daily expenses and only investing in jewels, gold and savings account cannot be the base of a portfolio. This lack of awareness can be detrimental to their long-term goals, especially retirement.
Investments also need to be in product that are diversified and have the potential to earn higher return and beat inflation in the long run.
The biggest mistake that women make is refusing to be in the driver’s seat on the way to their financial freedom. They are natural savers and planners; many just don’t realize that they can surpass others when it comes to making their own financial decisions.