It's official: heartbroken women are poorer

But gorgeous girls guard their finances.

But gorgeous girls guard their finances.

Men emerge from relationship breakdowns in far better financial shape than women, who are at much greater risk of falling into poverty, especially when children are involved.

New research shows women’s disposable household income declines by an ­average 29% after a break-up while for men it is just a 5% fall.

The Melbourne Institute study – From Partnered to Single: Financial Security Over a Lifetime – found the risk of falling below the poverty line (which is defined as when household income is below 50% of the national median) more than doubled for women a year after breaking up.

For women overall, in the first year of separation the risk of poverty increased from 9 to 22% (13 percentage points more than women in a relationship), while for men the poverty risk shifted from 9 to 13%.

“Women with children below school age are 16 percentage points more likely to be poor in the year after separation than otherwise similar women with preschool-aged children who remained partnered,” the report, based on longitudinal data from the Household, Income and Labour Dynamics in Australia Survey finds.

Most at risk were women who didn’t have a job before they broke up and older women with school-age children.

Both groups either find it hard to move into employment post-separation or it may not be financially worthwhile because of welfare settings, the study finds.

Melbourne Institute academic Guyonne Kalb, co-author of the report, said women who weren’t employed before separating could find themselves in a “poverty trap” as their employment prospects relative to non-separating women fell further after separation, especially when older children were involved.

Professor Kalb said “prevention” policies that supported both people in a relationship to be ­employed, including flexible work hours and more equitable access to childcare, could help ­alleviate the risk women face on separation.

Both government and employers could create such policies, she said.

“Women with young children may not have been out of the ­labour force for long, so they tend to return to employment, but for women with older children who aren’t employed when they separate, the prospect of finding a job is harder as their connection to the workforce has declined.”

The study also finds that the tax and transfer system might need recalibrating to support separated women into work, which is their best way to lower their risk of poverty.

“Separated women who are the main residential parent of a child are more likely to incur ­losses in income support ­payments or family tax benefits from every dollar earned, and at the same time are more likely to need formal childcare to facilitate their own employment than a woman who is living with the child’s other parent,” the study concludes.

“As a result, an employment opportunity that is financially worthwhile for a partnered woman may not be financially worthwhile for a separated woman. This suggests that policy ­reforms to reduce these cumu­lative impacts of tax rates, withdrawal rates in family support and income support payments, and the net cost of childcare that can trap recipients in poverty, should be on Australia’s policy agenda.”

Leading family law expert and head of practice of family law for Cullen Macleod Lawyers Rebecca Bunney encourages women, especially those starting their careers and planning their futures, to heed the warnings of this research.

"If you are choosing to have children, guard your own income earning capacity. Do not be the first one to say 'I’ll go part time'. There could be scope there for you to both go to four-days, explore those options. Men and new dads should take their paternity leave or look at annual leave options as studies have shown when men are involved with the kids from birth, they become more involved parents down the track," Bunney told The Oz.

"Do not quit your job, because then you are stuck. When one person earns the money, usually they take control of making decisions."

She said when approaching a long-term relationship or marriage that may involve children, a couple should be open and honest about finances and any financial baggage.

"Work all of this out in the beginning and you’ll never have to worry about finances later. Disclose all of your assets and debts, ensure everyone’s cards are on the table. Couples that are able to have those discussions and have open and honest styles of communication will, more often than not, never have to call in lawyers or endure a bad break up," Bunney added.

"It's important to say things like 'I don’t want to be 100% responsible for the finances' and I don't want to be '100% responsible for the kids', when that is shared and sorted, you will have an equal relationship."