3 Major Financial Planning Issues Facing Women
Author: Emily Guy Birken
There’s no denying that men and women often view financial planning from different perspectives. The reasons are varied – everything from cultural expectations to practical considerations. And while most financial advice isn’t gender-specific, it’s clear that ignoring the differences between how men and women plan for their financial futures can put women at a disadvantage.
Here are three money issues that often affect women, and how you can work around them:
1. Women live longer and tend to make less money
The pay gap between men and women has been news for what seems like forever. It’s disheartening, to say the least, that women still earn about 20% less than men do for the same job. This means women are already at a financial disadvantage in planning for retirement, as they have less money to put aside.
Add to that the heartbreaking statistic that “80 percent of men die married and 80 percent of women die single,” and it’s clear that women have a big potential problem in planning for their financial future. Namely, they have to plan for a longer amount of time and will have less money to put away.
Farnoosh Torabi, author of When She Makes More, suggests that women should plan on being very aggressive with their retirement savings: “We need to make sure that we’re really stocking our retirement accounts, that we’re doing everything we can to protect ourselves, that we have disability insurance, and that we take full ownership of our income.”
Unfortunately, this is easier said than done, with one reason being how women often view their money.
2. Women tend to think of their money as benefiting their family
Women are often culturally encouraged to share their income with their families. On the surface, there’s absolutely nothing wrong with this: of course, you want to spend your income on your children or to help out your elderly parents.
The problem arises when a woman continues to feel responsible for family finances while neglecting her own financial future. She may feel as though she has no choice but to send money to her adult children, help pay for their college education, or bankroll her parents’ retirement.
Remember the standard airline advice to put on your own oxygen mask before assisting your child? It’s also sound advice for women planning their financial future. You can’t help your family if you’re struggling, so take care of yourself before offering a hand to your family. It may feel cruel, but it is better for everyone.
3. Women are often intimidated by investing
Many behavioral finance studies have shown that women tend to have less confidence when it comes to investing than men do. A Prudential Financial study on the phenomenon referred to it as “the confidence gap,” and it can severely hinder a woman’s investment portfolio. According to NASDAQ.com, “Women’s lack of confidence can lead to inertia when making investment decisions, aggravating women’s tendency to underinvest in risky assets.”
On the other hand, women tend to stay the course and not make as many stock trades as men. And if the pandemic has taught us anything, it’s that no one can really predict future moves consistently. Stay the course, because that gives you the best chance of success.
If you don’t feel confident about your ability to make good investments, partner with a trusted financial adviser. Even if you never feel as though you can pick your investments by yourself, a smart and trusted adviser can help you realize your goals without having to step too far outside your comfort zone. (Though don’t forget to vet your prospective advisers before working with them!)
The most important thing to remember? No one else will care about your financial future as much as you do, so make investing in your future a top priority.