The Power of Knowledge

Women of different generations have always faced unique challenges.  Baby boomers born between 1945 and 1964 redefined the expectations of traditional women’s roles as they sought more empowerment in their choices, pursuing equality in both the workplace and home.  Women of Generation X, born between 1965 and 1980, have benefitted in building upon the inroads made by baby boomers but have found themselves dealing with different sources of stress. Sandwiched between raising their children while also caring for aging parents, Gen X women continue striving to succeed in the workplace as they pursue ways to manage their own health and happiness.  Simultaneously, they must prepare for nearing retirement.  Meanwhile, millennial women born between 1981 and 1996 are the most educated group of women in American history.  As a result, they have high levels of confidence and career ambition.  Many choose to get married or start a family later in life than generations before, if they select this path at all. 

Given the strides women have made over decades, and the further progress that has been achieved by each generation, the results of a recent UBS study “Own Your Worth 2020,” discussing women, wealth, and the path to financial independence, are surprising. The study showed 54 percent of millennial women living with male partners deferred to their partners for long-term financial planning, as compared to 39 percent of boomer women. With as many demands on their time that women have, it’s understandable that it might feel easier to allow a spouse to take over the task of managing long-term financial plans. However, considering the disadvantages that they already have when it comes to earning money, it would be wise for women of all generations to learn everything they can about managing their finances so that they are an equal partner in making informed decisions.  

Financial Disadvantages Women Face

  1. Women do not earn as much money as men.  A study by the Institute for Women’s Policy Research stated that women earn 49 cents to the typical men’s dollar.
  2. Studies show that women are more conservative and less confident investors than men.  A study by Wells Fargo found that 38% of women surveyed took a more conservative investing approach involving little or no risk in their portfolio, which could result in underfunded goals. 
  3. Women generally tend to be the family’s care provider.  While a man may work without interruption throughout his career, traditionally women who become mothers have experienced gaps in their career paths as they manage pregnancies and may choose to pause their work ambitions to care for their children.   
  4. Women fall behind in earnings and benefits potential.  According to Money Magazine, overall women work an average of 12 years less than men.  This leads to less in Social Security and pension benefits, along with loss of time to take advantage of compounded interest and potential employer contribution matches to retirement plans.
  5. Women may face a more costly retirement.  Statistically, a 65-year-old woman will live to age 86, and 45% have a chance of living to 90.  According to Fidelity Investments’ 16th annual retiree health care cost estimate, as a result of women’s longer life expectancy, they can plan to pay $147,000 as opposed to men’s $133,000 in additional health care costs.
  6. The pandemic has increased demands on a mother’s time.  Some schools are closed or have switched to an online format while many men and women have transitioned to working from home.  Extra at-home responsibilities assumed by a woman might result in compromising her work, potentially contributing to an increase in the wage gap.

The pandemic has also brought new insight to many women.  The same UBS study highlights that eight in ten women want to financially protect themselves and their families more than before.  This is opening new lines of communication as two-thirds of the 3,000 surveyed intend to have financial discussions with their spouse, and nearly four in ten are considering more thorough financial reviews.

Where Can Women Begin?

  1. Get a baseline.  Many women are already involved with their family’s bill paying and budgeting but may not be familiar with the details of other long-term investments or retirement savings plans.  Opening a dialogue with a spouse or partner can be a first step in getting a full picture of your assets and liabilities.
  2. Actively participate in tax preparation and review.  Your tax return has a good amount of information as it relates to your income and finances.  Reviewing the numbers and asking questions of your spouse and tax preparer can be helpful.
  3. Review insurance policies.  It’s important to understand what coverage is in place for you in the case of a spouse’s disability or death.  Life changes such as purchasing a home or having children may make it a consideration to increase policy coverages.
  4. Seek out financial education.  Rather than deferring to a spouse because they may (or may not) have more financial knowledge, seek out answers to questions from reliable resources.  Search online for respected financial educators and read their blogs, watch their informational videos, and begin familiarizing yourself with a variety of financial topics.
  5. Talk to an advisor.  You don’t need to have all your ducks in a row before speaking with a professional and you may want to consider working with a financial specialist who has demonstrated experience in helping women.  An advisor can fill in the blanks of your financial education and help you to understand what you may not know so together you can make good decisions for your family.

The coronavirus pandemic has served as a reminder that life is unpredictable.  While many things can feel out of our control, managing our finances doesn’t have to be.  Strengthening your financial knowledge will only give you more security and confidence to enjoy the life you are building together.  If you have any questions, please contact us.