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How money-smart is the Singapore woman?

Women have come far — in terms of education, equality and self-esteem. In the 1970s, the literacy rate for women was 54.3 per cent, compared with 83 per cent for men. Today, the figure is almost equal, at 95.2 per cent versus 98.6 per cent. Singaporean women have also made inroads into political and corporate offices.

Women have come far — in terms of education, equality and self-esteem. In the 1970s, the literacy rate for women was 54.3 per cent, compared with 83 per cent for men. Today, the figure is almost equal, at 95.2 per cent versus 98.6 per cent. Singaporean women have also made inroads into political and corporate offices.

Women also seem to have found their financial footing. Or have they?

In Singapore, there is a curious gender disparity when it comes to Central Provident Fund (CPF) withdrawal patterns for retirees.

Data shows that men withdraw more money, spend some, then leave about two-thirds of their withdrawn savings in low-interest-accruing bank accounts for at least a year after withdrawal. By contrast, women withdraw less CPF savings and spend less. By leaving larger sums with CPF, where it earns a higher interest rate, the women are better off.

Yet, it is important to note that this is not because they make better financial decisions but because they make more risk-averse decisions than men.

A research project I have been working on with Professor Sumit Agarwal, the Low Tuck Kwong Professor at the National University of Singapore Business School, and PhD student Xin Zou, studied how the presence of a bankrupt person affected the spending pattern of his neighbours.

On average, neighbours in the same building cut spending on credit and debit cards by 3.5 per cent. Notably, women formed the bulk of this shift — their spending decreased by 7.4 per cent. As their (bankrupt) peer cut back on spending, so did the women. This is risky territory for women if they continue to be swayed by the consumption pattern of their peers rather than make decisions based on their actual financial capacity.

Another study, based in the United States, by Bertrand, Goldin, and Katz in 2010, looked at the progress of graduates from an MBA class at a top university. Just after graduation, both genders earned about the same and were at the same management level. Fast forward 10 years, and more women than men had dropped out of the workforce. The women who stayed earned less money than their male counterparts and were at lower management levels. The main reason cited was the women had to take on childcare responsibilities, which led to less job experience, greater career discontinuity and shorter work hours.

What is interesting is that even for such a highly-educated group, social norms still kicked in. While the study was conducted in the US, the pattern is probably more evident in Asia, where traditional norms are more rooted.

Indeed, according to an article by gender-equality advocacy group AWARE, 43 per cent of the women cite domestic responsibilities as the main reason; the figure is 1.8 per cent for men.  These figures were based on a Ministry of Manpower survey of economically inactive persons.

These barriers to economic participation, as documented in the article by AWARE, have important consequences, in that the average Singapore woman retires with significantly smaller CPF savings than men.

In 2013, the median CPF savings for women aged 51 to 54 was about S$90,000, and for males, S$130,000. In reality, this poses an even greater deficit as statistically women outlive men and should be putting away more for more years.

These studies show that even the modern woman does not always make decisions that are best for her financially and, more importantly, that best equip her for retirement.

What can be done to get women to be more financially literate?

Besides Government and organisation interventions and social policy changes, women would do well to pro-actively get engaged. Take the initiative to be informed. Speak to professionals, have a network of friends to compare notes with about financial decisions and learn how to navigate the complex world of financial products such as health insurance and mortgages. Even if they are not working, married women should be involved in family financial decisions to ensure any decision made also represents their interests.

Today, there is a plethora of financial products tailored specifically for women that take into consideration key milestones (such as marriage, children, retirement); women should take the opportunity to talk to multiple experts in these areas to find out what would work best for them.

For most women, a good financial decision can mean living a financially comfortable life now, and later on, an easier, earlier retirement.

 

ABOUT THE WRITER:

Wenlan Qian is Assistant Professor of Finance at the National University of Singapore (NUS) Business School.

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