Ladies, it’s time for a reality check. The unfortunate truth is that women experience low-income and poverty at a much higher rate than men. In fact, up to 40 per cent of older, single, retired women now live in poverty, according to not-for-profit foundation Women In Super.

There are many reasons why women end up with less later in life, but it largely comes down to structural and systemic issues. The so called gender pay gap, super gap, wealth gap, investing gap, time spent on unpaid work and the ‘pink tax’ all play a role.

Luckily, it’s not all bad news. Flourix Wealth principal advisor Rachel O’Connor says with a little knowhow, women can take control of their finances and overcome some of the well-known financial traps.

“While keeping up pressure to close the gap is important, women can’t afford to wait for the world to change,” Ms O’Connor says. “We need to take things into our own hands and make sure we’re managing our finances to minimise the impact of this on us personally.”

The shocking statistics

In case you’re in any doubt about the seriousness of the issue, consider that women retire with 47 per cent less superannuation than men, yet live five years longer on average.

Why is that the case? Here are some of the key drivers behind the gap[1]:

• Women spend an average five-years out of the workforce to care for children and other family members, missing out on income, promotions and superannuation payments.
• They’re more likely to work part time (43%), spending five-hours more per day caring for children than men.
• Even when women do work full-time, they earn 18 per cent less than men. Sometimes for the same job.
• Female graduates earn $5,000 less than their male counterparts, again, sometimes for the same job.
• Yet the ‘pink tax’ means that women pay seven per cent more across the board, on items ranging from clothing and personal care products to pens and kid’s toys.
• Finally, women are more likely to dip into their own savings when things go wrong in a relationship, choosing to provide for their family while neglecting their own retirement.

It’s little wonder that women over 55 are considered the fastest growing homeless demographic in Australia.

So what can you do about it?

Plenty, according to Ms O’Connor, who says it’s essential to have proper planning, investment and protection strategies in play.

“One element is being aggressive with your strategies, for example setting stretch goals for saving and investing in growth assets. Other aspects include mitigating risk, so that a setback doesn’t make an already challenging situation impossible.

Supercharge your super

One of the best ways to save for the future is through your superannuation fund, due to the associated tax benefits. But not just any strategy will do. Women need a tailored approach to ensure their money lasts as long as possible.

Ms O’Connor says one of the biggest contributors to the super gap is career breaks, whether it’s for family or other reasons, such as returning to study, change careers or travel.

“Making voluntary super contributions before you leave the workforce will give you a head start and help reduce the impact of a break in your career,” she says.

“Many employers will allow you to salary sacrifice a bit more of your pay into super, which can increase your balance and also reduce your tax. This can be a great way to take control of the situation and ensure that you aren’t falling victim to these gaps.”

If your income has dropped due to unpaid leave or part-time work, you may qualify for the government super co-contribution. Or, if you have a spouse, they may qualify for a tax offset if they contribute to your super while your income is low. Another option is contribution splitting, where up to 85 per cent of your spouse’s super is transferred to you each year to even up your balances. Speak with a financial planner to find out what’s the best option for you.

Invest with purpose

While having a strong savings plan is important, you may also need to take a proactive approach to investment to reach your goals.

“Investing, even a small amount, whether in your own name or via extra super contributions is a good place to start,” Ms O’Connor says. “Many online investment platforms enable you to start with a very low balance (though be sure you know what fees you’re paying, because this can eat into the returns pretty quickly on lower balances).”

And it’s never too early, or too late, to start.

“The strategies you adopt and the areas you focus on are likely to differ depending on your age, but the end goal will be the same. To increase your financial freedom and security.”

Insurance

Once you’re on track to building your financial nest egg, it’s important to have the right protection strategies in place. That includes adequate insurance and an emergency fund of at least three month’s living expenses.

“Illness and injury can totally derail your financial plans, so it’s really important to consider what you and your family will need to stay afloat should the worse occur,” Ms O’Connor says.

“Insurance can be structured to be relatively cheap depending on your circumstances. It can be similar to the cost of your mobile phone bill each month depending on a number of factors.”

Starting young

Creating a better financial future for all women means we need to start early, by teaching our girls money management tools and techniques that will help them overcome these hurdles.

Start a savings plan early and look into online investment platforms offering ‘children’s accounts’.

“These can be a great way for kids to start learning about investing,” Ms O’Connor says. “They can start with relatively small amounts and watch their money grow using the app. Due to compound interest, starting early could give our girls a serious head start.”

Make sure to do your research thoroughly before signing up, as fees can quickly eat into low account balances. Look for accounts that are fee-free for those under-18.

Perhaps the most important thing women can do to reach their financial goals is get expert financial advice. A financial planning professional can give you advice on the best superannuation and investment strategies, as well as which insurance/s you’ll need, to reach your financial goals sooner.

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Not sure if you’re on track for a lifetime of financial freedom? Worried about how you’ll fund your retirement? Or simply relying on someone else to make it happen? Take control of your finances now by speaking with a Certified Financial Planner (CFP^®) professional. You can find one today using our Match My Planner tool.

[1] Figures supplied by Women in Super, The facts about women and super