Motherhood Penalty and how Women can control their Financial Future

With International Women’s Day on March 8th this year, Vision Property & Finance wants to mark the day by taking a look at some of the roadblocks women can face financially, as well as how they can take control of their financial lives through financial education and financial planning.

Vision’s Leigh Johnston, a Financial Planner with our Newcastle office explains some the struggles women can face and how Vision Property & Finance can help women secure their financial future.

Anyone who believes women have it ‘easy’ has probably never been a witness to childbirth; doctors say the impact and trauma on a woman’s body associated with having a baby is akin to being involved in a serious car accident. Surely, you would think with everything women go through in this one act of selflessness which helps keep our society growing, mothers would never have to worry about their financial future.

If you’re thinking women’s financial futures are any more assured because of their self-sacrifice in motherhood and nurturing and raising the nation’s children, you would be wrong!

The Motherhood Penalty

Diversity Council Australia CEO, Lisa Annese, in an interview with Pro Bono News, described the Motherhood Penalty as all of the set-backs women face in their careers and working life as a result of experiencing pregnancy, childbirth, and child-rearing.

“Women who become mothers or really take on caring responsibilities have a penalty in the workplace in terms of their pay, their ability to progress, and sometimes their conditions of employment. Essentially it is as though your career gets derailed once you become a parent.”

As reported by Pro Bono News, the national gender pay gap now stands at 16%. This means, on average, over the course of a 40 year working life women will earn $543,504 less. This is a very significant financial disadvantage that affects women’s financial future.

Adding to this, the Motherhood Penalty also extends to the Superannuation system. According to a recent study by the Australian Services Union (ASU) in conjunction with public policy think-tank, Per Capita, approximately 53% of women will retire with fewer funds than their male work colleagues.

Motherhood Penalty Contributes to Poverty for Women in Old Age

With time spent out of the workforce raising children, the gender pay gap, ever-higher costs of childcare, relationship breakdowns and the much-higher frequency of casual and intermittent work, it is no wonder the women surveyed in the ASU-Per Capita research feel retirement poverty is almost assured.

Strategies to Help Women Gain Financial Security in Retirement

Yet according to Leigh Johnston, Financial Planner from Vision Property & Finance, there are a number of financial strategies available to help minimise the impact of the Motherhood Penalty on women’s retirement living standards.

“As part of comprehensive Financial Planning advice we look at a person’s financial circumstances to see exactly what kind of position they are in with their current income as well as tax. We also take stock of their cash-flow situation to gauge whether or not it is feasible to contribute a little more to their superannuation.”

Leigh says everyone’s situation is different and the financial advice clients receive is not a one-size-fits-all suite of strategies. Before detailed discussions on the options ahead for someone, it is really important to become thoroughly familiar with clients’ unique personal circumstances.

“Knowing your client is absolutely essential in determining appropriate strategies. This comes from in-depth discussions with clients and the completion of a ‘fact find’ which forms the basis of any advice to follow.”

Time Frame to Turn Around – How Long Does it Take to Fix?

The important thing, says Leigh, is that women come to see a Financial Planner as soon as possible. Retirement poverty is a ticking time-bomb that is full of nasty surprises. The best way to get on top of this problem is by acting quickly and as soon as possible.

“Don’t leave this problem to fester! When talking about time-frames for superannuation clients, these are often determined by someone’s age, planned retirement age, legislation surrounding preservation ages, as well as the aged pension. But, one thing is sure; acting as soon as possible to put in place plans for your financial future will have the best long-term outcomes possible.”

Starting from someone’s retirement age and working back to their present situation very often illuminates what needs to change in someone’s financial life in order to live comfortably in retirement.

“As part of the advice process,” says Leigh, “we would work backwards to determine any current shortfall that needs to be addressed as part of our strategy. When people see the gap they need to close on paper, it can be a force for change and a resolute desire to get this part of their life handled.”

There are a number of strategies available to help overcome the Motherhood Penalty so financial security in retirement is not just a dream but a reality.

If you would like to discuss how these strategies may help you, contact Leigh Johnston from Vision Property & Finance on 02 4014 1999 for an obligation-free chat about how we can help you reach your financial goals.


*Leigh Johnston is a representative of FNP Solutions Pty Ltd (ABN 87 156 409 531) Trading as Vision Property & Finance Newcastle a Corporate Authorised Representative of PATRON Financial Services Pty Ltd ABN 12 122 381 908 AFSL 307379