More Wealth, More Challenges

Prudential Financial’s latest biennial study of women and money released this month shows that women are becoming a greater economic force:

  • 53% of women are now financial breadwinners.
  • Womens’ median income has grown 63% in the last three decades.
  • They are expected to control $22 trillion in wealth by 2020.

Special Financial Challenges

However, women face a specific set of financial disadvantages that make it increasingly important for them to be responsible for their own long-term financial health:

  • Women are more concerned than men about household expenses, debt and their ability to save for retirement.
  • Women are more afraid of becoming burdens to their families.
  • With an average widowhood age of 56, but an 80.8 year life expectancy, women need to plan for their long-term futures.
  • Women are more risk-averse when it comes to investing.

Takeaway: Women need to do more to plan for their economic well being.

Women’s Top Money Fears

Michelle Matson, author of Rich Chick and vice president of Matson Money, an investment advisory firm managing over $3.1 billion, was interviewed by Jenna Goudreau in Forbes about women’s top money fears and how to overcome them
She  says that women’s biggest fear of failure due to not knowing enough. She says that women often become overwhelmed by the information proliferation, and feel they have to be smarter than everyone else to succeed.
Bearing in mind that, while men may be motivated by the thrill and challenge of investing, women are typically more concerned with the long-term results, Matson recommends 7 small changes that can make a big impact in helping women becoming more confident about their finances planners.

7 Small Steps to Confidence

1.Start Today

“Bag lady syndrome” is Matson’s term for the fear women often suffer of being penniless, homeless and alone. This fear may escalate small money concerns into visions of total destitution:

It can paralyze you. You don’t know what to do, so you don’t do anything.

To conquer the fear, face it. Express to your partner that you’d like to learn more about your finances, or schedule time to review where you currently stand.

2. Wade In Slowly

Instead of trying to do too much right away, Matson suggests moving slowly to learn and understand your finances and consider a financial plan. Locate and read all of your financial statements to get a snapshot of your current accounts. A good place to start is with financial books written specifically for women like Matson’s Rich Chick, or Women & Money by Suze Orman pr Does This Make My Assets Look Fat? by Susan Hirshman.

3. Identify Goals

Establishing a vision of the future helps to set realistic goals to achieve it. Perhaps your goal is to buy a home or own your home outright. Once you understand where you are and identify where you want to be, you are ready to create a plan for getting there.

4. Learn And Understand Your Strategy

Matson finds that many women get comfortable once there’s a strategy in place and fail to take the time and effort to understand and review it.  But the more you understand it, the better you can make it work long term. More understanding leads to more confidence and generally better results. She points out that men don’t necessarily make better investing decisions, but are more likely to seek out the information that will guide their decisions.

 

5. Keep Interviewing Your Financial Advisor

The Prudential survey finds that 35% of women use a financial advisor and a significant portion also would consider doing so. This is a good trend, but  women must also take responsibility for this relationship and ensure they understand all actions and communications. Since a good advisor will act as a coach and take the time to explain and answer questions, consistently ask questions and know the reasons for recommendations.

6. Take A Financial Class With A Friend

Woman can feel like they’re not alone and turn learning about money from a chore into something fun by joining a program with a friend. Discussing the knowledge with your companion can help you reinforce it and give you incentive to stick with it.

7. Teach Money Basics To Your Kids

Learning through teaching is a powerful way to reinforce your knowledge and confidence. Discussing the basics of money, your financial philosophy and your long-term plan with your children not only provides them these tools, but can help you clarify the concepts for yourself. These conversations can occur seamlessly in your daily life— for instance,at the register  or at home when paying the bills.

Considering that the Society for Human Resource Management‘s report 2012 Gender Gap in Financial Literacy Research shows women still lagging men in in key areas of financial planning with the gap between the genders widening in nearly every area of financial planning, simplifying and reinforcing can be an important means of boosting women’s financial understanding and confidence.

Significantly, women have an important advantage over men as well, since the report showed that woment tend to do better with long-term planning, taking small steps can go a long way to helping women secure their family’s and their own financial future. In fact, while short-term, more transactional quantitative decisions such as budgeting or investing appear to be more appealing to men who enjoy the “game” of it, women bring a long-term focus to the process that men often lack.

Related Article

Study: Gender Gap In Financial Literacy Grows

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