“Save at least 60% of your income when you start earning”, is the first financial advice that I ever received and it was from my accountancy teacher at school. From a young age we are taught about the importance of saving money and research has shown that women save more than men. A recent example would be from the Jan Dhan Yojna (zero minimum balance account) where the average balances held by women were 30% higher than that of men. And conventional advice is also that because of the wage gap, fewer active years in work on average due to childcare responsibilities and a higher life expectancy, it is important for women to save more of their income towards retirement. The Women and Money Power 2022 survey showed that gold, provident funds, fixed deposits and other traditional instruments is where Indian women put their money. They found that only 10% of their respondents were investing in stocks. A majority of respondents also had difficulty in understanding financial jargon and that also contributed to them shying away from market-based instruments. Another study found that if given 1000 USD, men were 2.5 times more likely to invest in stocks than women. The Girls that invest podcast and Ellevest are some great women led enterprises looking to give financial advice that cater to women. Simran Kaur from Girls that Invest mentions how money media hasn’t been inclusive enough of women and how that translates to investment behaviour. Financial independence is important and that stems from not just working for money but also from making our money work for us.
While women tend to save more, they do not invest as much. Savings deposits and fixed deposits are relatively secure instruments that a lot of women prefer. One can argue that maybe women just don’t want to invest! But, women choosing not to invest while having equal access to information and opportunities is different from now when women don’t invest because they do not know enough or feel like ‘it is not for them’. One’s investment choices depend on the level of income, stage of career and a ton of other reasons. People tend to be riskier with investments in their early years and prefer no-risk options as they grow older.
There is also a stark difference globally, in the way financial advice is given to men versus women. While financial advice in women’s magazines talk about how women can save money with groceries, men’s magazines focus on compounding and building wealth. Data from 2017 shows that financial firms spent 13 times more for advertising in male-skewed magazines and even if the financial advice reached women, the advertisements did not cater to them. This is also connected to the fact that women are severely underrepresented in financial services roles. Women are also seen to second guess their investments more than men even while making more returns. But, the number of women investing has substantially increased after the COVID-19 pandemic.
Now that we have established that, let us look at why it is important that more women invest!
Inflation eats money up. Inflation is the buzzword these days and with stagnant incomes and rising prices, cost of living has increased globally. While savings or even fixed deposits give us returns, they are minimal. It is increasingly getting hard to preserve the purchasing power of money. Retail inflation in India in October 2022 was 6.71%. The interest rate given by SBI for Savings Bank accounts is a mere 2.70%. It is quite impossible to successfully beat inflation if we only save our money. Knowing other avenues and investments will greatly help.
Women make good investors. We believe that women take fewer risks than men, especially while investing. That is a good thing because it means that they aren’t swayed by ‘hot-tips’ and do not trade on whims. Women do not invest as much as men even in traditional instruments but the existing difference becomes greater for riskier instruments like cryptocurrency. Interestingly though, women are willing to take more ‘social risk’ than men. Venture philanthropy investment teams that had a good representation of women took more risks, i.e. they were more willing to give chances and push more boundaries when it came to investing in social-impact issues. We need to collectively invest in cleaner and greener companies that are committed to inclusivity and more women investors will certainly help that cause.
Environmental, social and government (ESG) funds have become a popular means of ethical investing. Women’s interest in ESG funds and value based investing can also help in long term wealth creation. Let’s start off this New Year with the hope that more women let their money compound and work for them.
Written by: Gayathri Arvind
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