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Should Women Take on More Financial Risk?

Financial risk is relative to many things including what your income is, what the long-term outcome you desire and is it a genuine risk or just a step outside of your comfort zone?

Another factor to consider is your level of financial literacy, and financial literacy is often the overlooked element of any financial plan and risk assessment.

As a financial adviser, and a single woman who has worked in financial services for over 25 years, I have had many conversations with women of every age as to what they consider to be risky and there is a very broad interpretation of “risk”. The common thread between all of their thoughts and opinions on the matter is whether they understand what is going on in their financial life. Many don’t.

If you are a woman who is just starting out in your career or returning to work after a break, you may think it is time to take on some increased financial risk to get things going. Or you might think that you have a long time to worry about sorting it, so you file it away for later and don’t take any action. Both of these scenarios carry different risks. But do you realise this?

If you are a woman heading towards retirement or have had a “lifestyle reboot”, such as being made redundant, recently divorced or have unfortunately been widowed, you may think that it is time to be more conservative to preserve what you have. Or, perhaps, you think that the opposite is more appropriate, and will go full steam into building your retirement nest egg. Again, both of these scenarios carry different risks. But do you realise this?

Do you think it is risky to take out a home loan because you may take a career break to have children or travel, or because you are a single income earner? Are you concerned or frightened to pick a superannuation fund or an investment option that you can’t access for 30 – 40 years? You are not alone in either of these scenarios.

A significant number of investors who have suffered actual, realised losses during a downturn in the share market (not unrealised or “paper losses”) potentially had sold shares at the bottom of the market. They panicked. They didn’t understand that shares can be volatile and, just as during the initial covid wave, shares can go down very dramatically, but most will return, not overnight, but that is where a long-term strategic plan, that you understand and stick to, is of benefit. There is no market more emotionally driven than the share market.

There really is no right or wrong answer as to whether you should take on more risk. It comes down to what you think risk is, your comfort levels in experiencing the highs and lows of economic markets, your long-term goals and how much of your plan you actually understand, and that is if you have a plan at all.

All of these factors are related to financial literacy. Addressing financial literacy is the key to understanding and accepting a level of risk that you are comfortable with.

With greater financial literacy, comes a reduction in the concern regarding risk as you understand the elements of financial markets, lending, superannuation, insurance, whatever your scenario is. It’s clear, it’s part of your long-term financial plan and you are confident that it is right for you.

How do we increase financial literacy is the real question.

When we unleash the power of women, we can secure the future for all.” UN Secretary-General Ban Ki-moon underscored in his message for the International Women’s Day 2015.

There is a solution to help with the financial literacy shortfall. Find a financial adviser, accountant or educator that you “click” with. One you feel comfortable asking the questions you think are silly, but you really want to know the answer to, and they will answer in a way you understand. Someone who wants to help you understand your financial situation and empower you to make educated decisions but also know when to reach out for clarification.

The key to understanding whether you should take on more risk is having a good grounding in financial literacy.


By : Sharon Goodwin