Take The Reins In Your Hands

When it comes to investing, women participation is generally low in decision-making, partly because of the biased belief that they do not know much about money

“A woman’s best protection is a little money of her own.”

—Clare Boothe Luce, American politician, ambassador, and writer.

I recently saw the movie The Colour Purple and found it deeply disturbing. And while it tackles many issues, I was happy to see the protagonist Celie living free of abuse and humiliation after she managed to become financially independent (she did this by tailoring and eventually inheriting her biological father’s estate).

She could walk away and not return simply because of the option that money gave her. She could walk away from the security of a man and a marriage, because of the provision that money offered her. The movie was set in a time when women in the US had few rights, and almost none, if they were poor African American. While times have changed, certain attitudes haven’t.

While I was talking about the movie to a friend, he gave the example of someone in his social circle who puts her entire salary into the joint account she holds with her husband. The husband resents the wife spending on herself. He guilt-trips her with questions, such as, “What do you need a pedicure for when you can paint your nails at home?” or “Why do you need a hair spa, just use conditioner”. However, he spends liberally on electronic items, which he calls his weakness and his toys. Moreover, he decides where and how their money should be invested, while the wife had no say in it.

Considering the last part, I know someone personally who told me that her husband does all the investing, because she is clueless about it, even though she earns more than him. Clearly, this seems to be much more common than I probably realised.

Accept If You Don’t Know

In 2022, the Chicago-based research and rating firm Morningstar, came out with a research finding that women were less likely to think of themselves as investors, and also reported lower confidence. The results echo findings from global studies of financial literacy, where women are more likely to answer “I don’t know” than men.

Do you know why this is good? It’s because it suggests that women guess less frequently. They have a greater willingness to admit to not knowing. This mindset works in their favour because they are humble in their acknowledgement, eager to learn, and have an open mind.

They won’t suffer from an ‘Overconfidence Bias’. This is a common error that individuals make. It is a tendency to overestimate their abilities. It is ego-driven and those who succumb to it think they are better drivers or cooks or investors, or whatever it may be.

In investing, which is what we are concerned with here, this can be disastrous. That’s so because when money finds its way to a bad investment, it is lost. Not only is the capital lost, but all the power of compounding that it potentially had is also lost.

The ‘Overconfidence Bias’ makes one cocky and do stupid stuff. Overconfidence has expensive consequences.

Take Professional Help

I remember the experience of my friend Zainab who works in a renowned audit firm. When single, she stayed away from investing. On her family’s advice, she bought some insurance policies and gold. After marriage, her husband took charge of the investments. When she got divorced, reality hit hard. Outside the insurance policies, gold and fixed deposits, she was clueless. Recently at a lunch, someone asked us what we would do if we suddenly got `10 crore. To this, one girl in her twenties, smartly answered: “I would get a financial advisor who is not my mom.” While everyone laughed, I found it incredibly wise.

The recent DBS Bank India-Crisil Survey looked at 800 (self-employed and salaried women) across 10 cities, and threw light on the way urban working women planned, prioritised, and managed their money.

There is one data point that I would like to bring to attention here. It indicates the circle of trust when it comes to finances. (see Information Sources Women Prefer). Half of those surveyed  (47 per cent + 3 per cent) took help from family members, friends, or colleagues, which is incidentally a huge number.

No matter how much your circle of trust loves you, and however well-meaning their intentions are, they are probably feeding you with wrong advice. To know where to invest smartly, you need to have clarity on what you are saving for, the number of dependents on you, and your ability to take risk. Then comes asset allocation and investing avenues.

Do remember that not everyone is in a position to guide you. Incidentally, this is also where people fall for stock tips and invest in the latest thematic fund or the best performing fund, and then panic when the investment dwindles in value and end up making the mistake of pulling out at the wrong time. Do avail of the services of a professional.

Take Ownership

Whether you are earning or not, you need to know where the money is being invested and why. Your marriage is a partnership and you are both in it together. The decisions your spouse makes will impact you and your children and any other dependents.

At any point in your life, you and your spouse are saving for a child’s wedding or education, or your retirement, or supporting parents. You need to know where the money is being invested. In extreme situations, there could be death, or loss of employment. Being clueless will serve no one.

You owe it to yourself and your family to take a keen interest in understanding and managing money, whether you are a homemaker, a breadwinner, a part-time earner, or, however you choose to label yourself.

At least, understand the basics of investing. Take interest, discuss, and question. Don’t be afraid to ask. Don’t shirk from offering solutions.

Change Your Attitude

One of the most misleading narratives being fed to us is that finances are a man’s world. Contrary to what we have been told, being financial savvy does not come naturally to most men.

Money management is not the exclusive domain of men, and women do have a mind for finances. Before you scoff, just look at how your grandmother and mother saved and made ends meet with whatever resources they had. Women are intuitively smart about money.

Moreover, money need not be a bone of contention. It can be a great source of happiness and can serve you well too.

Shrug off the stereotypical narratives. Decide with your spouse what your common goals are and what memories you would love to create. Let money be a great bonding factor to creating a great life together ahead.

By Larissa Fernand, Behavioural Finance Expert