Money and Life
(Financial Planning Association of Australia)

Divorce is the leading cause of financial hardship for women (1). So it's important to take control of your money and plan for a time when you may become financially independent.

Spending priorities

According to a 2014 survey of over 2,000 women conducted by RMIT, 59% have experienced financial hardship as a result of divorce (2) and 80% chose providing for their family as a top financial priority. Only 50% considered a comfortable retirement an important financial goal (3). So, these issues are compounding the deeper, systemic issue of a gap in women's earnings and retirement savings that's cumulatively forcing some women into severe poverty in their senior years.

2016 Financial Planning Week Ambassador Jane Caro recently stated that women over 55 are the fastest growing demographic among homeless people in Australia (4). This is a really alarming indicator of the financial hardship older women are facing. It's also a signal for women of any age to take charge of their financial wellbeing, so they can be ready for whatever the future may hold.

The super gap how much is it?

We know women are still earning less across the board than men. And they're also most likely to be the ones taking time out from their career to care for children and other family members. These are two of the reasons why women can expect to retire with around half the super balance compared with men. Figures from the Association of Superannuation Funds of Australia (AFSA) show the average super balance for women at retirement is $138,150 and $292,500 for men. (5)

When you consider AFSA expects a single person in retirement to live on a budget of $24,108 a year (6) and that's just for a "modest" lifestyle a $138,150 nest egg isn't even going to last a decade. And that budget doesn't include rent or mortgage repayments. So if you don't own your home outright, it's going to be even harder to make ends meet in retirement.

The fallout from divorce

Losing out on owning a home can be one of the many financial consequences of a divorce. After you and your ex have split your assets, you may not have enough left over to buy property in the suburb you call home. Or you may scrape enough for a deposit, but you're starting all over again with a 25 or 30-year mortgage to repay.

This is just one of the financial setbacks women can expect to experience when their marriage breaks up. In their recent Divorce: For Richer, For Poorer report, AMP and the National Centre for Social and Economic Modelling (NATSEM) found the average divorced women has assets valued at 90% less than her married counterpart and can expect to be earning 10% less as well. (7)

Taking control

If you're currently single, or think of your relationship as rock solid, it's still really important to plan for your financial future as an independent woman. Happily married, or single, women can face financial hardship because of illness or bereavement too. And there's plenty of help available to get you up to speed on important money matters including debt, insurance, investment and superannuation.

In May 2015, ASIC launched a new Women's Money Toolkit to guide women through important financial decisions and support them towards better outcomes for their financial wellbeing. It deals with all kinds of topics from having kids to managing finances in a relationship and you can tailor the content to suit your life stage and circumstances.

If you're a woman living in a regional area of Australia you may have already come across the Regional Women's Financial Literacy Project.

Seeking financial advice from someone who really understands how to support you to make the most of your money, even when you're not earning much, can make an important difference to your financial stability and wellbeing.

Whether you're getting married or divorced, starting a family or retiring, a CERTIFIED FINANCIAL PLANNER® professional can offer valuable advice on preparing for a secure financial future. Find a local CFP professional today using Match My Planner.

For more tips and tricks on how to manage your money, avoid mistakes that can derail your financial future, and secure your financial freedom, download our free eBook.

Sources

1RMIT Survey Women and Money across the generations, 2014, page 23 http://www.financialliteracy.gov.au/media/558801/women-and-money-across-the-generations.pdf

2 RMIT Survey Women and Money across the generations, 2014, page 23 http://www.financialliteracy.gov.au/media/558801/women-and-money-across-the-generations.pdf

3 RMIT Survey Women and Money across the generations, 2014, page 16 http://www.financialliteracy.gov.au/media/558801/women-and-money-across-the-generations.pdf

4Sydney Morning Herald, "Getting sound financial advice is crucial for us all, but especially for women" Jane Caro, 22 August 2016, http://www.smh.com.au/lifestyle/news-and-views/opinion/getting-sound-financial-advice-is-crucial-for-us-all-but-especially-for-women-20160821-gqxwug.html

5ASFA Research and Resource Centre, Superannuation Account Balances by Age and Gender, December 2015, page 3, https://www.superannuation.asn.au/ArticleDocuments/359/ASFA_Super-account-balances_Dec2015.pdf.aspx

6AFSA Retirement Standard, December Quarter 2016 https://www.superannuation.asn.au/resources/retirement-standard

7Sydney Morning Herald, Women with children biggest financial losers of divorce: report, Daisy Dumas, 13 December 2016, http://www.smh.com.au/lifestyle/news-and-views/news-features/women-with-children-biggest-financial-losers-of-divorce-report-20161212-gt92op.html

Colin Brinsden, AAP Economics and Business Correspondent
(Australian Associated Press)

The Reserve Bank still does not expect to lift interest rates for a number of years, despite upgrading its economic forecasts.

Central bank governor Philip Lowe says the economic recovery has been stronger than earlier expected, which has seen a welcome decline in the unemployment rate to 6.6 per cent.

"These outcomes have been underpinned by Australia's success on the health front and the very significant fiscal and monetary support," Dr Lowe said in his post-meeting statement.

But he said both wage and inflation pressures remain subdued.

As economists expected, the central bank left its cash rate at a record low 0.1 per cent and other monetary policy measures unchanged at its first board meeting of the year on Tuesday.

But Dr Lowe reiterated the board will not increase the cash rate until actual inflation is sustainably within the two to three per cent target range.

"For this to occur, wages growth will have to be materially higher than it is currently," Dr Lowe said.

"This will require significant gains in employment and a return to a tight labour market."

The board does not expect these conditions to be met until 2024 at the earliest, a year later than it had previously envisaged.

However, the central bank did surprise financial markets by announcing it will extend its bond-buying program beyond mid-April, and when it will start purchasing a further $100 billion in federal and state government bonds.

This quantitative easing (QE) program aims to keep long-term market interest rates, and in turn borrowing rates, low.

Dr Lowe said the central scenario is for economic growth to return to its pre-pandemic level by the middle of the year and grow by 3.5 per cent over both 2021 and 2022.

"Although the upgrade to the outlook seems somewhat at odds with the extension of the QE program, to achieve the RBA's inflation target the economy needs economic activity to be significantly higher than its pre-COVID peak," BIS Oxford Economic chief economist Sarah Hunter said.

New figures show employment grew further in the early stages of 2021, albeit still lagging when compared to a year ago.

The Australian Bureau of Statistics said payroll jobs grew by 1.3 per cent nationally over the fortnight to January 16, with increases reported in all states and territories.

The weekly ANZ-Roy Morgan consumer confidence index a pointer to future household spending also rose for a second consecutive week and is close to its long-term average for the first time since late 2019.

These latest positive results add to a spread of economic figures in recent weeks suggesting the economic recovery is in full swing.

"It is important to recognise the vast extent to which Australia has come back and that comeback has been enormous across our economy," Finance Minister Simon Birmingham told Sky News.

But the minister warned there will be lasting changes as a result of the pandemic and the government won't be offering a helping hand to businesses that are no longer viable.

"Some businesses won't find their business models from before are as viable in the future as they might wish them to be they will have to change and adapt," Senator Birmingham said.

"So we don't want to prop up activities where people may need to adjust their business model. They may need to adjust their circumstances for the future."

Money and Life
(Financial Planning Association of Australia)

It's the shortest month of the year so what better time to make a change and save some money? We've got three tips for each of the next four weeks to help those dollars pile up in Frugal February.

Week 1 the same lifestyle for less

In week one, we're easing you into the swing of saving with some good financial habits to get you into a new frame of mind without giving anything up yet

1. Cash only - starting now, stash your credit card in a safe place and use only cash for all your purchases. Tap and go is quick and easy, but it also tends to make us more blasé about our budget. When you find yourself hitting the ATM twice in one weekend for shopping and entertainment, you're more likely to watch what you're spending.

2. $50 fun - think of at least four activities you can do on your own or with friends and family, that cost $50 or less. It could be a low-cost gardening project, heading off on a hike or paying for a group lesson to learn something new. Just remember to include snacks or food in your plans and costing a café pit stop or takeaway could quickly blow your $50 budget.

3. Swap and save - beauty, books, clothes, appliances, if it's something you spend on, try swapping instead. Clothes are an obvious choice, but if you and your friends have a weakness for cookbooks or games, try organising a big swap party to grow your collection.

Week 2 be food wise (and fuel your bank balance too)

Take some time this week to put the spotlight on how you eat and save money along the way.

1. Lose the lattes (long blacks, flat whites and macchiatos too) - however you drink it, at four dollars-a-cup, takeaway coffee is a daily indulgence that can quickly add up. Pre-pandemic, Aussies were well known for spending an average $1144 a year on takeaway coffee! That dropped to $728 ($14 a week) in 2020. So if you changed your habits last year, think about whether it's something you can live without.

2. Ditch the takeaway and cook in - bulk ready meals and takeaway can feel like a time saver, but the convenience is costing us $1976 a year, according to Suncorp's annual Cost of Food report. Instead, try cooking bulk meals using a few key staples like flour, pasta, rice, legumes and potatoes and store the leftovers in the freezer. You'll quickly see the savings roll in.

3. Purge the pantry (and the fridge) - a lot of households keep enough stuff in the cupboards and fridge to last for weeks, perhaps months. How much could you save simply by living off what you already have instead of shopping for groceries this week?

Week 3 entertainment that's lighter on your pocket

1. Dine at home - like many COVID-19 led changes, our spending on dining out halved last year, from $54 down to $27. You could save yourself $1404 a year just by sticking to this new, lower spending limit. So why not make a meal of your home cooking for family and friends?

2. High and dry - with the pubs shut for long periods, Aussies splashed out an extra $2 billion on household alcohol last year, according to Finder analysis of ABS data. That's really no surprise, given 20 per cent of us increased our drinking over the lockdown months. No wonder giving up alcohol is a popular challenge taken up for Febfast! Whether you pocket your savings, or choose to donate it, you're going to feel better after a month without drinking.

3. Give Uber the elbow - whether you're staying sober, staying home or both, there's really no need for you to be using Ubers this month. Delete the app from your phone so you'll be less tempted to use it when you're in a rush to get home!

Week 4 big expenses, even bigger savings

1. Pay less for your mobile/electricity/insurance - if you've been with the same provider for a while, for any of these services, there's a good chance that shopping around for a new deal can save you a significant amount across the year.

Read more: Top negotiating tips to cut your bills now

2. Holiday for free - With international travel off the cards, house sitting or swapping locally are good ways to enjoy a getaway without shelling out for a hotel room. If you don't have a home that's Air BnB ready or appealing to swappers, get on to websites like https://www.happyhousesitters.com.au for housesitting opportunities in Australia. 

3. Ditch your debt - whether it's taking a year or two off the mortgage or saying goodbye to credit card balances, make this your month to find smarter ways of living with your liabilities. The amount you'll save on the overall cost of borrowing can be substantial when you take steps to pay off your loans faster.

Looking for more ways to save? Get tips to prevent overspending or set yourself up with a flexi-budget for the new year.

Moneysmart
(ASIC)

More than 70% of Australians that have life insurance hold it through super. Most super funds offer life, total and permanent disability (TPD) and income protection insurance for their members.

When reviewing your insurance, check if you're covered through your super fund. Compare it with what's available outside super to find the right policy for you.

Types of life insurance in super

Super funds typically offer three types of life insurance for their members:

• life cover - also called death cover. This pays a lump sum or income stream to your beneficiaries when you die or if you have a terminal illness.
• TPD insurance - pays you a benefit if you become seriously disabled and are unlikely to work again.
• income protection insurance - also called salary continuance cover. This pays you a regular income for a specified period (this could be for 2 years, 5 years or up to a certain age) if you can't work due to temporary disability or illness.

Most super funds will automatically provide you with life cover and TPD insurance. Some will also automatically provide income protection insurance. This insurance is for a specified amount and is generally available without medical checks.

Cancellation of insurance on inactive and low balance super accounts

Under the law, super funds will cancel insurance on inactive super accounts that haven't received contributions for at least 16 months. In addition, super funds may have their own rules that require the cancellation of insurance on super accounts where balances are too low.

Your super fund will contact you if your insurance is about to end.

If you want to keep your insurance, you'll need to tell your super fund or contribute to that super account.

You may want to keep your insurance if you:

• don't have insurance through another super fund or insurer
• have a particular need for it, for example, you have children or dependants, or work in a high-risk job

Insurance for people under 25

Insurance will not be provided if you're a new super fund member aged under 25 unless you:

• write to your fund to request insurance through your super
• work in a dangerous job you can cancel this cover if you don't want it.

Use our Life insurance calculator

Work out if you need life insurance through your super and how much cover you might need.

Superannuation and insurance can be complex. If you need help call your super fund or speak to a financial adviser.

Pros and cons of life insurance through super

Pros

• Cheaper premiums - Premiums are often cheaper as the super fund buys insurance policies in bulk.
• Easy to pay-  insurance premiums are automatically deducted from your super balance.
• Fewer health checks - Most super funds will accept you for a default level of cover without health checks. This can be useful if you work in a high-risk job or have health conditions that can make it difficult to get insurance outside super. Check the product disclosure statement (PDS) to see the exclusions and treatment of pre-existing conditions.
• Increased cover - You can usually increase the amount of cover you have above the default level. But you'll generally have to answer questions about your medical history and do a medical check.
• Tax-effective payments - Your employer's super contributions and salary sacrifice contributions are taxed at 15%. This is lower than the marginal tax rate for most people. This can make paying for insurance through super tax-effective.

Cons

• Ends at age 65 or 70 - TPD insurance cover in super usually ends at age 65. Life cover usually ends at age 70. Outside of super, cover generally continues as long as you pay the premiums.
• Limited cover - The amount of cover you can get in super is often lower than the cover you can get outside super. Default insurance through super isn't specific to your circumstance and some eligibility requirements may apply.
• Cover can end - If you change super funds, your contributions stop or your super account becomes inactive, your cover may end. You could end up with no insurance.
• Reduces your super balance - Insurance premiums are deducted from your super balance. This reduces your savings for retirement.

Check your insurance before changing super funds. If you have a pre-existing medical condition or are over age 60, you may not be able to get the cover you want.

How to check your insurance through super

To find out what insurance you have in your super you can:

• call your super fund
• access your super acount online
• check your super fund's annual statement and the PDS

You'll be able to see:

• what type of insurance you have
• how much cover you have
• how much you're paying in premiums for the cover

Your super fund's website will have a PDS that explains who the insurer is, details of the cover available and conditions to make a claim.

If you have more than one super account, you may be paying premiums on multiple insurance policies. This will reduce your retirement savings and you may not be able to claim on multiple policies. Consider whether you need more than one policy or whether you can get enough insurance through one super fund.

Before buying, renewing or switching insurance, check if the policy will cover you for claims associated with COVID-19.

When reviewing your insurance in super, see if there are any exclusions or if you're paying a loading on your premiums. A loading is a percentage increase on the standard premium, charged to higher risk people. For example, if you have a high-risk job, a pre-existing medical condition or you're classified as a smoker.

If your super fund has incorrectly classified you, contact them to let them know. You could be paying more for your insurance than you need to.

Making a claim on insurance in super

To make a claim for insurance through your super fund, see making a life insurance claim for more information.

Colin Brinsden, AAP Economics and Business Correspondent, and Steven Deare
(Australian Associated Press)

Future Fund chair Peter Costello has questioned whether government officials realise keeping interest rates low has helped stock markets to levels that may be unsustainable.

Mr Costello was speaking on Wednesday about the Future Fund rising 4.9 per cent during the December quarter. The result is a recovery from the carnage on financial markets during the early stages of the coronavirus pandemic.

That compares with the initial capital injection of $60.5 billion from the then Howard government.

Mr Costello cited fiscal and monetary policy helping, including the record low cash rate of 0.1 per cent.

"We are living through a period of extraordinary stimulation," he said.

Low rates have helped markets in many countries, including Australia and the US, rebound to record or near-record highs.

Yet Mr Costello was wary of dangers.

"The fact is money is very cheap. If you can borrow at one per cent, the easiest thing to do is go to a stock market and look for two or three per cent.

I don't know if governments realise this but by keeping interest rates low they are pumping stock markets.

Stock markets in the US, more so than here, have been pumped.

You're getting unbelievable valuations on companies that don't make profits.

You've got to ask yourself, is that sustainable in the long term."

Chief executive Raphael Arndt also cast doubt on markets' current levels.

"To believe market pricing, you would have to believe that monetary policy stays easy for that whole period," he said.

He said his team did not feel it was prudent to take more risk.

Mr Costello said the quarterly result comes after an unprecedented year where markets fell by more than a third during the early months of the pandemic.

"In the second half, markets staged a strong comeback," Mr Costello, the former Howard government treasurer, said.

"The Future Fund navigated the early market falls well, mitigating their impact on the portfolio, and performed strongly in the second half of the calendar year."

However, he said the extent to which the public health outlook improves, the duration of lockdowns, the recovery in the economy, and the pathway to reducing support measures will impact the outlook for markets.

"Investors must also remain conscious of the potential for economic, market and geopolitical shocks, particularly given that the ability for policy makers to respond with further measures is limited," Mr Costello said.

While the one-year return on the fund of 1.7 per cent was below the target of 4.4 per cent, the 10-year return of nine per cent compared with the target of 6.2 per cent.