Personal Finance

Solving the women's financial conundrum


Today, as we mark International Women’s Day, we warmly salute all the women in our lives and in the world. Women are the bedrock of our society and we applaud them for their abundant selflessness and compassion.

Nobody can argue against the very important role that a woman plays in a household as a wife or mother or simply single. Women have progressed from being pure homemakers with more women working than ever before.

But yet in spite of having more financial discipline and better savings habits than men, women still tend to lag behind their male counterparts in most financial indicators. What financial risks do modern-day women face? What can they do to improve their situation?

Even though more women have joined the labour force, they still make up only 36 percent of formal sector employment in Kenya. From the Zamara database, on average, women are paid around 14 percent less than men.

Although this gender pay gap is reducing, equal pay is unlikely to be achievable for some time to come. Women also take breaks from their career for childbirth and raising children and are more likely than men to quit their jobs to care for a family member. More women are likely to work part-time than men.

When women take breaks from their careers for childbirth and raising children, they sacrifice the momentum they have gained from working in their careers.

Thus, overall women suffer lower incomes in comparable occupations and a shorter working life with frequent employment interruptions. All of these have an impact on their financial security and future well-being.

In addition, the level of financial literacy is a key determinant for financial independence and, especially for women empowerment. 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, have a 20 percent less likelihood of owning a bank account in a formal financial institution and are 17percent less likely to borrow.

Even for women who have careers, often their income is seen as just supplementing the income from their husbands and they are expected to have all the home 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, for example, not being able to handle money well, making poor money decisions and falling prey to inappropriate advice. Even though womens’ savings groups have a more than 90 percent success rate, only a small percentage of these women are able to grow their existing wealth and become upwardly socially mobile.

But worse, many women sometimes find it difficult to leave abusive marriages or relationships because of not being financially independent. Hence, the importance of women acquiring the financial knowhow to manage money and participate in money-related issues of their families whether they are working 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. Further, elderly women in Kenya are more than twice as likely as their male counterparts to be living alone.

Hence, they need to have accumulated a higher retirement capital than men and face additional costs of medical expenses.

To illustrate this, a woman aged 60 years generally needs approximately 15percent more than a man of the same age to provide for the same pension for the remainder of her life. From the Zamara database, we see that the average woman’s retirement account is almost 20 percent lower than the average man’s equivalent pension account.

Hence, it’s important for women to save more towards retirement to achieve a reasonable level of retirement benefit. As an indication, women need to save 16percent of their salary for 35 years to achieve an adequate pension while men need to save 13.8percent.

Given women take career breaks for child-bearing and caregiving, it is important to plan for the period off work and make up the loss of savings during the working years.

Even more critical: don’t spend the retirement savings and make a concerted effort to compensate for the non-contributory period by contributing even more than the previous amount.

For the stay-at-home wife, the contribution of a stay-at-home mother by raising the children and managing the home is invaluable and is as important as a breadwinning husband.

However, not earning a salary leaves the stay-at-home mother without means to save for retirement and she is entirely dependent on her husband for financial support.

This level of financial dependence on a spouse may later result in great difficulties in the case of divorce or death where the woman is usually uninformed of her benefit entitlement.

As a result of these challenges, fewer resources and a lack of planning, women are even more vulnerable to old-age poverty and be forced to rely on family support or government for living expenses.

So how can women change their financial trajectory? Financial literacy for women need to be given topmost priority. Taking the initiative to educate oneself about financial matters is key.

Each woman can improve her financial wellbeing by making a financial plan and seeking the right financial advice for savings, investment and personal and family insurance.

In this day and age, there is ample information and online resources for women who wish to educate themselves.