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Wealth creation for women
14 June 2017
We take a look at four life events which women, in particular, need to pay attention to when thinking about their finances.
Wealth creation is a lifelong journey, but the path can take some dramatic twists and turns. This is especially true for women as they navigate the gender pay gap, the super gap, and the gaping hole in their earnings when they take time out to care.
We’ve put together some financial tips to help women get ahead, come what may.
Your first job
This is your first real opportunity to save so grab it with both hands while you have the capacity. Start by redirecting some of your income into a separate savings account while you map out your plans for the future. Look for something with higher interest.
"If you don’t think about what you want, and aim beyond the moment, you can be limited by your current situation", says Westpac Senior Financial Planner, Diana Saad.
You might start saving for an overseas trip, your wedding, a first home or an investment property. The amount you put aside is not as important as establishing good financial habits – budgeting and saving strategies - that can repay you with interest.
Prepare for maternity leave
If you are planning to take maternity leave, look into arranging partner contributions to your super fund.
You may also be eligible for the government co-contribution, especially if you begin maternity leave part way through the financial year and your annual salary falls below $51,021 for 2016-17. Annual salary would need to be below $51,813 in 2017-18 to be eligible for government co-contribution.
You may be eligible for the co-contribution two years running, if your maternity leave extends into a second financial year, says Diana.
Dealing with divorce
Diana says she sees a lot of smart, sophisticated women who still leave the responsibility for joint finances to their partner. But what if you and your partner separate?
No-one enters marriage expecting divorce. But in the spirit of 'expect the best but plan for the worst', make a point of knowing how your joint finances work. This includes bank accounts, investments and superannuation.
And make sure you own your own life insurance policies. Cross-ownership of life insurance is common (except for income protection which must be held in your own name). But there can be unintended consequences if your relationship breaks down and you need to make a claim.
"Say you have trauma cover in your ex-partner’s name and you are diagnosed with cancer. They can receive the payout, even if you are divorced", says Diana.
Women live longer than men on average, which means they need more savings to fund their retirement. Unfortunately, women are still retiring with much smaller nest eggs than their partners.
With this in mind, the sooner you start re-directing income into super or other investments, the longer you can have for compound interest to work its magic.
"It’s never too early to start saving for retirement, even if you just put away small amounts. You could salary sacrifice into super or build a share portfolio. The choice is yours, as long as you are saving money that can increase in value and generate income in retirement", says Diana.
Review your situation regularly
Your financial needs and priorities may change over time as your circumstances change – such as, having a child, going through a divorce, or if your partner passes away. You should consider protecting your wealth to account for any changes like these by updating your will, super beneficiaries, insurance or any other financial commitments you may have.
A Protective Trust
A Protective Trust is designed to protect the assets or beneficiaries of the trust from external attack such as divorce or bankruptcy.
Testamentary Trusts with restrictions on who can access capital are by definition protective and can be established easily by a competent estate planning lawyer.
Have an up-to-date will
Wills mitigate risk. All of us have something: super, savings, life insurance, assets of some sort, maybe a car, etc. If your estate (what you leave behind) is in a bit of a mess, or in dispute if something has gone wrong in your relationships, an up-to-date will declaring your intentions can help sort things through.
The articles represent the views of the authors and not necessarily that of the Bank. You should seek independent professional advice before acting on any matters set out in the articles.