Throughout history, women have always found a way to take back some semblance of financial security in the face of often vigorous societal opposition. Far too many women still face these challenges.

I moved to Australia from Sri Lanka as a child. Gold played a similar role for women in Sri Lanka as other parts of the subcontinent. I was given gold at birth, and gold jewellery at auspicious or significant dates in my life. When I got engaged in 2019, I had an emotional exchange with my mother as she gave me ancestral gold bangles.

The tradition of giving gold stretches back centuries. Bestowing gold is the equivalent of providing women with an emergency fund. If you’re in a situation that you need to get out of, you have your gold jewellery. It is easily transported, hidden and can be quickly exchanged for money.

My colleague Mark LaMonica recently sent me a New York Times article about Sri Lanka’s female Prime Minister. They interviewed a Sri Lankan woman about her hopes for Sri Lanka’s future. She earns $100 a month as a garment worker and describes the challenges of increased cost of living. Half of her salary went to baby formula for her daughter.

The article quotes her as saying, “We don’t need the government providing us with food — we can somehow manage. What we need is a country where I have the space to make a little extra cash so I can invest in my daughter — maybe a pair of gold earrings for her first birthday.”

Mark is forgiven for asking how gold earrings could possibly be an investment. It doesn’t fit the traditional idea of an investment in western culture. However, for this mother it would be an investment in her daughter’s financial independence. It ensures her daughter has something to barter in emergencies, or to combat financial control.

A little further north, Indian women also use gold as a store of wealth and an emergency fund. They also leverage their community to build collective financial security by participating in the practice of Kitty parties. Women create an informal financial network where they each contribute to a ‘kitty’ at each meeting which typically occurs monthly. It is a network for savings and investment, but more importantly, it is for social support. The kitty is distributed to members of the group with priority given to those that are in financial need. If there is a woman that is part of the network that experiences financial control, abuse or needs to escape an unsafe situation, she will be given the kitty.

These informal financial networks can be found in many countries and cultures. Stokvels are communal savings groups in South Africa that are often used to raise business capital. This can help women who would not often be eligible for formal bank loans. It can lift whole families out of poverty.

Equubs in Ethopia collect savings and gift the lump sum to members to help cover large expenses. Think school costs or assistance during bereavement. It is community crowdfunding to help those in need during difficult periods in their lives.

Esusu in Nigeria and West Africa works in the same way as Kitty parties focusing on micro-entrepreneurs. Esusus give women access to financial resources outside of the formal banking systems.

Financial independence has always been a goal for women. Regardless of the confines imposed from social stratification women have strived to empower themselves. These are the ways that the women in their communities gained some measure of financial independence.

Financial independence in an Australian context

For many Aussie investors, financial independence has come to mean something else. The popularity of movements like FIRE (Financial Independence, Retire Early) has turned it into a blanket statement which means you are not reliant on anybody, or anything for financial support.

For many of us this may not be a realistic outcome prior to retirement. Yet, financial independence is similar to the pursuit of ‘success’. It is deeply personal to us; it is shaped by our experiences and our circumstances.

The notion of financial independence is often an ever-evolving concept where each milestone sets another in front of you. Just as we continue to grow as people over our lives we can grow financially as well.

In my case, my process started with relatively modest goals. After university, I wanted to pay rent and all my associated living costs. It was what was within reach for me and gave me a sense of personal and financial freedom. Increasing my own financial independence was and is at the core of my financial goals.

Since then, I have married and have achieved growth in my career. My evolving notion of financial independence now means being able to independently support myself regardless of any unforeseen future circumstances. This means that I have my own bank account, control of my pay checks and I have structured my finances in a way where I can spend (or save) money in whatever manner suits me.

This gives me assurance that I can retain independence if my life and circumstances change. None of us know what will happen. There are no foreseeable circumstances where I believe I won’t be happy in my relationship. Some people think that keeping funds separate to better navigate a relationship breakdown is crass. I see it as a safety net in case the worst happens. It gives me peace of mind now and it would provide me relief in a difficult time if it eventuates.

I feel lucky that I have the opportunity to make these choices. The members of the communities I described are not in the same position is me. They are finding alternative ways to build a sense of financial security in the face of the constraints that they have.
Looking to Australia, it wasn’t too long ago that women faced the same obstacles that the communities I described are trying to overcome. It wasn’t until 1971 that women were granted loans without a male guarantor. Too many Australian women still have constraints placed on them which limit their freedom.

In my own journey for financial independence my next step is to limit my reliance on my employer.

A common dream is to be able to retire early or leave a job and not look back. I haven’t reached that point yet. I have built my emergency fund to cover 4 months of expenses. I expect to be able to find employment within that timeframe.

I know my understanding of financial independence will continue to evolve. At some point I expect to no longer rely on a paycheck to cover my expenses.

Focus on your foundations

Many investors get swept up in the minutia of investing and continually tinker with their portfolios to maximise wealth.

New research from Morningstar shows that many of us are missing one of the key pillars of financial independence – an adequate emergency fund. It seems that many people have lost sight of the need for the financial security which the communities across the developing world are striving to obtain.

Emergency funds protect individuals against financial shocks. It is fundamental to financial wellness and also helps to support good investing behaviour. Despite this, the study finds that many people struggle to build up an emergency fund.

Building an adequate emergency fund gives me confidence and provides psychological safety. Women are more likely to experience abusive relationships or financial control and ill health. Single women who rent now have the highest poverty rates for retired Australians. The simple step of establishing an emergency fund can change your life.

In Morningstar’s study, only 41% had a fully funded emergency fund. Many people without an emergency fund struggled to make progress to achieve this foundational goal. 25% of survey participants had no emergency savings at all.

My emergency fund has now replaced my gold bangles. If the time ever came where I needed an emergency plan, they would be one of the last things I’d sell. They mean more to me than an emergency plan. My emergency fund is deliberately separate to the assets that I share with my husband or with my family. It is my psychological and financial safety net.

Get Morningstar insights in your inbox

Previous Future Focus columns:

Resources mentioned:

The key to being happy with your finances: New research from Morningstar’s behavioural research team looks into how to really achieve financial wellness.