Time and time again, stories emerge of women coming forward in the household at times of despair to help the family out of a financial crisis, using either her lifelong savings or possessions (i.e., gold jewellery) she’s been hiding away. They tend to be the financial ‘fail-safe’ that protects the family in times of need.

The question then arises: if women are the harbingers of the family, what is pulling them away from financial independence and empowerment? Why are they not more financially active?

It is common practice for women to depend on the ‘man of the house’ to manage investments and be the main source of financial knowledge for them. Likely because for years and decades, men have taken the role of breadwinners for most households. However, as trends change and women are taking an active and productive role in the workforce, they are becoming more front and center and are starting to see the need for effectively managing money – but this financial transition is still slow-paced.v

Some of the most likely and common reasons for this may be:

Gender Pay Gap

How much ever we try to deny it and try to stand for women’s rights, there exists a staggering gap in what men get paid versus a woman. Essentially, they are both doing the same job with the same responsibilities with (more often than not) added responsibilities at home, as well. But the gap is far from diminishing away.

Even the Actresses of Bollywood, which is supposedly one of the largest and most progressive film industries in the world, has been battling this war for decades with very slow progress.

The Monster Salary Index Survey outlines that India's gender pay gap is a whopping 19%, with men earning Rs. 46.19 more than women. Thus, making it harder for women to invest the amounts they receive in return for the hours of work they put in.

Cultural Traditions

It is normalized to see women manage household chores while men tend to earn for the family. Even with changing times, a vast majority of the families are very traditional in their ways and replicate these impositions even today.

This leaves women stuck in between four walls, limited to taking care of everyone but themselves. With minimal exposure to the outside world, they tend to depend on their partners to make financial decisions for them, eventually taking away power from their hands. Gold is probably the only form of “investment” that is usually saved for their daughter’s wedding. And the cycle goes on and on.

Women Are Risk-Averse

As per a woman’s emotional quotient, they tend to be quite risk-averse in comparison to men. The term “stock market” scares them, makes it seem like a gamble, which for the record, is not. A lot of this can be explained with the basic theories of behavioral finance.

The theory, at its most basic level would suggest that this is linked to men's overconfidence. Men, after a short time discussing or reviewing will believe they know everything they need to and can now make the best decision. At this point, they don't believe there is much risk. Overconfidence is one of the most common investment hazards, indicating that women are actually more qualified than men to invest in the stock market.

To say that women are risk-averse or uninterested investors is also incorrect. The issue is knowledge. Most women will want to understand more before making an investment decision, they want to know all the facts and understand their choices – and in general, they would be less risk averse and more involved in the markets if they armed themselves with the required financial knowledge.

With these behavioral and cultural differences that exist, it makes it even more evident that women need to take charge of their own financial literacy, be more independent and feel financially empowered. Women should be encouraged to begin saving and investing now, instead, women are missing out on opportunities because they are overly cautious due to a lack of understanding.

Another key reason to bring about this change is that women are the key role models for our future generations. A woman who shares household responsibilities, financially and emotionally, is an encouraging trend. Children learn from their surroundings, and they can recognize that there is no gender discrimination.

To gain that confidence, start learning now, take charge of your own financial education and then start to save and invest for your goals and dreams. Here are some basic pointers to get you started:

Financial planning

First, set clear and attainable financial goals, such as funding your child's school or ensuring a comfortable retirement. When building out your financial strategy, it's vital to account for inflation. If you're thinking about your child's education, keep in mind that a professional degree that costs Rs 4 lakh today will cost much more in ten years.

While a trained financial planner can provide you with investment advice, which is highly recommended, there is value in conducting your own research. You can learn about the advantages and disadvantages of each financial instrument by visiting reputable websites and sources of financial information.

Risk diversification

A wise investor will always spread her risk across a number of instruments. A high-risk asset, such as equity (commonly known as shares or stocks), should be paired with a low-risk product, such as bonds. Your investment portfolio should include a well-balanced combination of equities, debt, life insurance, and real estate, among other things. Mutual funds are great vehicles as they have already diversified and keep the investments well-balanced for you.

Track your investment on a regular basis

It's easy to become comfortable and assume that once the investments are made, the money will flow in. It is, however, every investor's job to keep track of their portfolio's performance.

Plan and execute

Last but not least, start planning for all of your financial needs as soon as possible. The cost of deferring investment will be borne by you in later years when investing will become a need rather than a choice.

To summarize, make financial literacy a priority, learn all that you can and become more financially empowered. Then, start planning, saving and investing – be more financially active – it’s a required step to gaining financial independence and it’s never too late to start.

Saving money is important but growing the value of your savings is even more important.

An Investor education and Awareness initiative of Aditya Birla Sun Life Mutual Fund

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