In the last 9 years I have worked with hundreds of women who have started small businesses on their own. Whilst many of the business ideas were good and some succeeded in their business venture. I realized they often had not paid serious attention to their family financial planning and protection in the process.
According to HSBC Canada, only 36% of married women are involved in the family’s financial planning, leaving the majority of investment and retirement planning to their husbands. However, men tend towards higher risk versus a low or no-risk approach. They prefer not to discuss long-term financial decisions with their spouses, and instead would rather make such key decisions alone. Many women are happy to let their men make these decisions until the reality of the situation hits them hard.
Here are 7 important reasons why women should care about, and involve ourselves in the family’s financial planning.
1. A financially secure family is a happy family
It is important for a woman to be involved in planning for the financial well-being of her family. Being financially secure ensures that not only the basic needs of your family are met, but also their physical, emotional and mental needs. Constant worries about money can strain relationships between couples, and financial stress, whether because of their needs or family tension, can also have a negative impact on children.
2. Understanding financial planning gives you knowledge of your family’s financial health
It’s easy to understand direct income (mostly salaries) versus direct costs (household expenses, education costs, so on), but taking the time to study and plan for your family’s future financial well-being is just as crucial. Do you know how much you will need to support your family’s lifestyle, your children’s college education and medical expenses? Will the returns on your investments, savings and insurance policies be sufficient to cover your needs?
3. Financial Planning helps you face the 3 Ds
Death, Disability and Divorce are unexpected tragedies that many find difficult to countenance, much less take the time and consideration to prepare for. Besides the emotional and physical toil, they are financial earthquakes that can happen without warning. Women who rely solely on their husbands in all financial matters are often ill-prepared to weather such storms. A woman must understand her financial vulnerability and be always prepared to take over the driver’s seat in the worst case scenario.
4. You and your family’s health insurance needs to be sufficient.
If you are a ‘trailing spouse,’ chances are that your health insurance will be tied to your husband’s salary package. However, in the event of job loss, ill health or divorce, a woman and her children may find themselves adrift without sufficient coverage. The solution? Take the time to understand the benefits and limitations of your current corporate health insurance package and make sure that you are adequately covered.
5. You and your husband may have different risk appetites in investing
Financial planning involves making sound investment decisions. All investments come with a degree of risk directly related to the return you expect. Your investment style and risk appetite may be totally different from your husband’s. By actively and jointly participating in financial planning with your spouse, you can avoid conflicts and unpleasant surprises, and invest for the well being of your family.
6. You and your spouse may not have the same dream retirement
It is important to plan for your ideal retirement, but if you do not participate in the financial planning process with your husband, the retirement you can afford may be very different from the one in your dreams. Discussing and planning for your retirement goals gives you a better chance of turning your dreams into reality. Sorting out both your expectations and differences early will help you reach your financial goals faster.
7. Denial is not an option
Understanding and participating in your family’s financial planning is your responsibility as a wife, mother and woman. Sticking your head in the sand like an ostrich is not a viable strategy. It is your family’s money and its financial well-being makes it incumbent upon you to be an active partner. Talk to a professional and strengthen your financial literacy by reading and attending courses to gain a better understanding and control over your family’s financial health.
In summary, your career and/or your motherhood may leave you little time or energy to consider and understand your family’s financial health, thorough planning for future scenarios and mutual understanding between you and your husband will alleviate further stresses upon your relationship and long-term well-being. Sharing the burden of planning for your family with your partner builds a stronger bond, ensures that all parties know what’s going on and establishes stability for yourself and your children. If you are in the know and financially prepared, the worst scenarios will be greatly eased, and the best scenarios will grant you consistent returns, both in terms of your money and your happiness.