20 Jun Why Women Grapple with Investing Money
What relationship do you have with money? Does it love you or leave you?
Just like human relationships, some people might feel they are like ‘soul mates’ with money but for others its ‘complicated’.
We all have different values, priorities and life experiences which influence our relationship with money. If you feel fearful, scared or whelmed by money you’re more likely to develop ineffective money habits. Common ones are avoiding making financial decisions, holding too much money in low-return assets or worse, not investing at all; being unable to spend money on right things, or unable to control your spending.
If you recognise yourself, don’t panic.
Some of us who are overconfident with money, especially those who have plentiful supplies of it, are not immune to bad money habits either. For example, people might take investment risks that are inadequately likely to be compensated with overall return, or risks that are gambling away the cash.
I am an advocate for financial literacy to be taught from an early age and I advise people to address what they’re relationship with money is first, before planning how your money will work for you.
According to the World Bank, women reinvest 90 per cent of their earnings back into their families and communities, focusing on education and health in particular. Here in the UK, according to Morgan Stanley, 84 per cent of women say they are interested in investing for impact and sustainability versus 67 per cent of men. This data shows women are more interested in investing for reasons more aligned with social responsibility rather than generating wealth for the sake of returns.
Do women also struggle with investing because they are less financially literate than men? From my own research I find most women who are bread winners are not familiar with financial terminology, tax relief and investment terms compared to the male breadwinners. Women also tend to earn less, take more part-time jobs and are more likely to take career breaks which makes them put less into investing.
To grapple with investing, women first need to have a healthy relationship with money:
– Treat money like an old friend. Do you check in on your mum or another family member or friend every day to make sure they are ok? Or to let them know you are ok? Do this with your wealth. Check what your daily spend is or what your bank balance is. Make this a habit. For your wealth to look after you, you need to look after your wealth.
– When blood is circulating in our body, we are physically healthy. When money is circulating in our life, we are economically healthy.
– Money does not buy happiness, but it does buy things that can make us happy. Blankets for the poor, private medical care for our parents, a roof for the homeless, a holiday home for your family, the list is endless.
A healthy relationship with money means you can balance your immediate lifestyle desires with your longer term needs.
Tips to get your started:
· Earn, Save, Invest, Spend. Treat money in this order. First earn it, then save, then invest a part of your savings. The rest is for you to spend according to your needs.
· Use affirmations to become comfortable with money. For example:
Money is constantly circulating in my life. I am so grateful for this.
· Familiarise yourself with finance terminology. What is APR, a dividend, net profit and shares, etc.
· Listen to podcasts on personal investing, follow people who are advocates on financial literacy and read blogs/ magazines such as FTMoney.
· Create a mood board of all the things you desire that are within your financial reach once you have mastered a good relationship with money.
Ultimately, investing is not just about money. It’s about the impact on our families, society and our planet. Learning to manage our finances is an important skill to master, and it bears the biggest dividend when you can say we’re ‘soul mates’.
Arfy Majeed is a chartered accountant and advocate for financial literacy to be taught in schools.