There are many reasons why very few women get to start from pole position in life's race to wealth. These include the three Cs. The three Cs summarise the key barriers to wealth creation: children, the capacity to earn, and confidence.
Children - affect both immediate income and longer term savings in the form of superannuation. It is one of the key reasons why men usually have twice as much superannuation as women.
Capacity to earn is another key. Research done by AMP last year found that even younger women aged under 32 earned 15 per cent less than the average man of the same age. It was also found that women were under-represented when it came to senior level management roles.
Confidence is also an area where women are slightly behind their male counterparts, but this is improving. A report released this month by the Financial Literacy Foundation found that 63 per cent of women say they have the ability to invest, compared with 75 per cent of men.
The chairman of the foundation's advisory board, Paul Clitheroe, believes women are more likely to have time outside the paid workforce along with lower incomes, which results in less superannuation in retirement. "Not only that, women's savings need to go further because they tend to live longer,'' Clitheroe said. "No matter how old you are or what you earn, it's easier than you think to take control of your money. A few simple steps, like having a plan for your money and sticking to it, doing a budget and keeping it up to date, and getting into the savings habit, can put you in charge of your money.''
AMP financial planner Darren James said financial security was about more than having a good job and steady income. "It's what people do with the money they earn that ensures they can have the lifestyle they want for the rest of their lives,'' he said.
Women who are ready to plan for their financial future should first assess their current position. "Set a budget but be realistic. Over-estimate expenses and under-estimate income. Businesses use a profit and loss statement and women should treat themselves like a business,'' Mr James said.
Changes in superannuation laws over the past few years have made superannuation a much more attractive investment.
Financial Planning Association SA chapter chairwoman, Kerrin Falconer, said last year's super changes allowed people to contribute to super more than was previously allowed. "Now, even if you are not in the paid workforce, certain contributions can still be made to superannuation if you are under the age of 65,'' she said.
Ms Falconer said a way to boost a woman's superannuation was with a spouse contribution, which is a payment made into a superannuation account on behalf of a spouse. "An added bonus of this type of contribution is that the contributing spouse will qualify for a tax offset of up to $540 for a minimum after-tax contribution of $3000,'' she said. "If the spouse earns less than $10,800 the full tax offset will apply. The offset cuts out at $13,800 per annum.''
Salary sacrifice can also be another superannuation savings strategy, and works well for people on the 30 per cent marginal tax rate or higher. "Salary-sacrificed contributions are taxed at a maximum rate of 15 per cent, and so it depends on your circumstances whether this is an appropriate strategy, but it is definitely worth considering if you wish to boost your superannuation savings,'' Ms Falconer said.
There are many superannuation techniques that women can use to increase their superannuation over their lifetime to compensate for time out of the workforce due to children and other factors. The key is planning. Contact us at Rate Detective today and we'll help you to plan for your financial future.