Why confidence counts when it comes to money​

Erika Jonsson headshot

Statistics about women and money can make for pretty depressing reading. From the day we start working we are paid less, with the Workplace Gender Equality Agency calculating the current gender pay gap at 15.3% for full-time workers. Women still do the majority of unpaid caring and domestic work, making up 75% of the part-time workforce, and we retire with about 45% less superannuation than men.

None of this comes as a surprise to most women. 

There is a growing appetite for change, from the new #Makesuperfair campaign to improve superannuation equality to companies such as Woolworths publicly setting their goals to eliminate the gender pay gap. But bureaucracies are slow-moving beasts, and the gender pay gap has barely changed in 20 years. Waiting for change is a dangerous game for women.

So, if we know that we are likely to earn less and retire with less savings than men, what can we do – at any stage of our lives – to improve our financial outcomes, particularly in retirement? 

The answer is, we can do a lot. And it starts with confidence. 

Fake it ‘til you make it

According to ASIC, women are overrepresented in the lowest financial literacy quantiles or excluded from traditional avenues for financial advice and information. We don’t trust ourselves as investors either – a major study by US investment giant Fidelity showed that both men and women strongly believe that men make better investors than women. 

However, the same study showed that female investors achieved returns that were, on average, 0.4% higher than men’s among Fidelity’s eight million investors - that might not sound like much, but over time it can create a significant difference in investment returns. That study and others also showed that women typically save more than men and are less interested in outsmarting the market, focusing on long-term gain and riding out the highs and lows that often spook investors. Why are these results so important? Because they show that, despite doubt in their own ability, women are actually capable of great financial outcomes.

Adding confidence to that equation makes that even more likely. A US study of more than 3,000 workers found that financial courage was more important to outcomes than financial literacy.

What builds financial confidence?

It’s all very well to know that financial courage is important, but building confidence is a process. And while confidence might be more important than financial literacy, there’s no doubt that understanding your money and what you want it to do for you will help. With that in mind, here are some ideas on building both confidence and knowledge for your financial journey.

Set goals: You can and should have more than one financial goal at a time. First, think about the big one – retirement. Consider when you want to retire and how much you realistically need to save to achieve this goal. Making extra contributions when you’re younger can make a big difference due to the power of compound interest. Other financial goals could include getting rid of credit card debt, paying off your mortgage early (which will help your retirement goal too!) or saving for a holiday. Visualising your goals can be a powerful tool for building confidence.

Know what and why you spend: There’s a multitude of tools to help you track and understand your expenses, but ASIC’s free TrackMySPEND app is among the best (and it’s free). Dividing your spending into needs and wants and understanding which expenses are fixed and which can be improved can give you a powerful head-start for saving – for example, getting fresh quotes once a year on your car or home insurance could save you hundreds of dollars better used elsewhere.

Beyond fixed expenses, think about why you’re spending too – knowledge is power, and financial mindfulness can help you avoid impulse purchases that only feel good for a few days. That’s not to say you should never spend on things you want, by the way, and it also doesn’t mean you should give up on a good coffee or a smashed avo brunch. Just understand where those things fit into your spending.

Take charge of your super: If you have super in multiple accounts, consolidate into one of them (the one with the lowest fees and the best performance) to minimise fees and build your balance faster. If you’re paying more than 1% a year in fees, chances are you could be doing much better. Sites such as SuperRatings provide independent information for comparing super funds. Search for any lost super too – don’t let apathy affect the quality of your retirement. 

Consider investing: If you’re fortunate enough to have money in the bank, investing can deliver higher returns than an interest-based savings account, particularly over a longer term. Automated investment management (sometimes called robo-advice) can deliver a low-cost, smart way to build a diversified portfolio that includes assets such as Australian and international shares, infrastructure and bonds. As with super, make sure you shop around for low fees and strong performance returns (remembering that past returns are never a guarantee of future performance).

Read: There are great resources online to help you learn more about your money, including whole free courses from banks on how to build financial confidence and literacy. There are also terrific books (such as The Barefoot Investor) that will empower you as you begin your journey.

Believe in yourself: Remember the research – women are generally better with cash than they believe they are. You don’t need a degree in finance to take control of your financial destiny – you need a bit of time and effort. 

That bit of time and effort to learn more about your money (and how it’s invested) could have a drastic impact on your quality of life – and not just in retirement, either. So, what are you waiting for? 

Erika Jonsson is Director of Digital Content at Six Park, a leading automated investment management company. Six Park is running a free seminar – How To Be A Superwoman – about financial confidence and literacy in Melbourne on November 14. For more information or to register for the seminar, visit the Eventbrite page

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