Financial Planning for Women Needs to Be More Nuanced and Intentional
Measure then seek improvement - financial strategies to consider
Recently I wrote the below article on Medium published by Modern Women, which particularly resonated with readers.
They told me:
“Women still do not worry about their finances. They know nothing and depend completely on their men folk. They have to learn self-dependence. They must be able to pay their bills and also build their wealth. Great tips! They must establish a financial plan and participate in investment circles.”
“This is an unsettling article.”
“This was very informational.”
“The more we can understand our financial situations, the better we can leverage them for the future.”
🌸🌸🌸
I want to share the article with readers here — I think your female partners, better half, co-workers, family members, and friends who are curious about growing wealth and building a more secure financial future in the long run, might like to read it. The strategies mentioned below not only apply to women but anyone who wants to retire with more financial comfort.
Women have many unique challenges, which we need to acknowledge, address, and continue to brainstorm with each other to support.
Let’s dive in!
It is a fact that women are not just living longer than men but are getting more educated and making higher economic contributions to the world.
According to the 2023 Pew Research Center report, women in America is the breadwinner in 16% of marriages today compared with 5% in 1972. About 30% of married couples earn the same amount of money. UBS found as many as one-third of US women in heterosexual couples are the primary breadwinner.
Nevertheless, wives pick up more household chores and caregiving responsibilities, while husbands spend more time on leisure activities. This is true in both egalitarian and breadwinner-wife marriages based on Pew Research.
American women currently control a third of US household financial assets (about $11 trillion). A McKinsey study shows because of demographic shifts and the passing of husbands (women live five years longer than men), by 2030, women will control much of the $30 trillion in financial assets baby boomers will possess — a magnitude of potential wealth transfer approaching the annual US GDP.
More than Gender Wage Gap — the Financial Health Gender Gap
The gender pay gap has hardly changed since the 1970s, according to the Pew Research Center. In 2022, women (full-time and part-time) earned an average of 82% of what men did. In 2002, it was 80%.
The problem does not end here.
Take a look at the survey data by Financial Health Network based on individuals ages 18 to 64, conducted from November to December 2021.
During the Pandemic, the financial health gap between men and women widened.
Data collected show only 47 percent of mothers in the labour force have a retirement account or pension (so over half do not!) compared with 66 percent of fathers. When both genders work, 73 percent of fathers have a retirement account versus 66 percent of mothers.
You can’t improve what you don’t measure.~Peter Drucker
![](https://substackcdn.com/image/fetch/w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F3d68af92-379d-4432-9541-793c5afbab9e_1527x588.png)
From the table above, women reported worse outcomes on all measures of financial health: spending, saving, borrowing, and planning.
In an event I helped organize for a group of women in finance in San Francisco in 2019, the speaker quoted a Merrill Lynch research that 61 percent of women would rather talk about their deaths than money.
When I was growing up, my father dealt with all the expense payments for my family, and my mother did not need to pay any bills in her life (although she handled her own investment portfolio in her old age as she is very plugged into the world and economic affairs)!
To the kids, my mother taught us how to save and be frugal, while my father taught us how to build wealth from a young age.
No wonder wives (in that generation) are less comfortable handling and talking about money, let alone growing it.
As of today, two-thirds of financial decision-makers in households are men. Often, financial advisors focus on the male partner or make biased assumptions about what the female partner needs or their knowledge level.
The 2022 Principal Global Financial Inclusion Index report supported the above statement: 42% of women said they could easily access high-quality and affordable professional financial advice (62% for men).
Let Us Revisit the Situation
Challenges faced by women:
👎 Women receive smaller paychecks than men for similar positions, spend fewer years working due to pregnancy and elderly care (about nine years fewer), and tend to work in the lower-paying segments of the economy (education and healthcare). Lower lifetime earnings bring about lower retirement wealth. US women receive social security benefits on average 80 percent of those men receive and also save less in employer-sponsored retirement plans.
👎 Women live longer than men. Longevity is not a bad thing for women. However, they are likely to spend more on health care during retirement than men ($47,000 more) and need to be more financially prepared for retirement. Check your longevity risk with this illustrator.
👎 Women report more concern and higher stress levels in managing their retirement savings and express lower confidence levels in their financial decision-making and investment acumen. They also do not have equal access to financial advice compared to their male partners.
Opportunities for women:
👍 Due to demographic shifts, rising dominance as breadwinners, and increased financial savviness amongst younger women, household wealth will heavily shift towards women in the next five years.
👍 When a woman is the higher earner at home, she can become more engaged in financial decision-making for the household and share power and responsibility with their life partners, resulting in better financial outcomes for the couple.
👍 Women investors favour impact investing, according to Money Crasher. Only 19% of women said they would invest in a company that was not considered socially responsible, compared to 51% of men. As women control more wealth, they will have more power in driving environment, social, and governance changes in companies via their investments.
Strategies for Women to Pursue Better Financial Health
🔑 Get more financial competence by starting a financial plan early, joining investment circles, or seeking women-centric advisors and retirement planning resources.
— Be the household CFO and establish a personal financial plan early. Be proactive and stay on top of your spending budget, debt, bill payments, retirement planning, life and disability insurance, and emergency fund creation. This is especially important for women in the sandwich generation — middle-aged adults who need to care for their elderly parents and children, which can jeopardize their own finances.
— Be financially curious. Fidelity and UC Berkeley found women investors have outperformed men over a ten-year period. Women are more risk-averse and take a more balanced and analytical approach to investing than men.
Investing circles under non-profit organizations such as Invest for Better led by Janine Firpo, a values-aligned investor, angel investor, and author of Activate Your Money (a book I highly recommend), empower women to take control of their assets and put them in investments that prioritize sustainability and social justice.
Subscribe to Bloomberg Newsletters and pick an area to start, e.g., the Businessweek newsletter.
— Find advisors who genuinely focus on women's financial and emotional needs. The right advisors (see checklist) can provide women with basic financial literacy and help them better understand their investment choices and life goals and craft a comprehensive strategy after women’s significant life situations such as divorce. Women are found to experience greater financial impacts from divorce than men. Advisors should also consider women’s longevity risk and create financial plans accordingly.
— Seek out your employer’s retirement planning resources to help you with caregiving and retirement income planning and generation.
Summarizing
Women are getting more educated and interested in growing their wealth. However, they face unique situations, which include lower lifetime earnings and longer living years than men, resulting in poorer financial health upon retirement.
At the same time, in my 25 years of investing career, I found women are curious and want more financial advice that aligns with their goals and needs and gain more financial knowledge to secure their financial future.
I have discussed several financial planning strategies women can adopt. These include:
✔ Establish a personal financial plan early.
✔ Participate in investing circles and read more about the macroeconomy.
✔ Seek the help of advisors who can educate them and focus on their needs.
✔ Leverage the employer’s retirement planning resources.
Better financial literacy and more money conversations in the family can mean better financial health and protection in the long run.
Most important: know that you are not alone in your financial journey!
Please let me know your thoughts or questions.
Here’s to your healthy financial future!
The original article was published in the Modern Women publication on Medium.
This article is for informational purposes only. It should not be considered financial, tax, or legal advice. Please consult a financial professional before making any significant financial decisions.
*Organizations mentioned in this article:
Principal Global Financial Inclusion Index
Goldman Sachs Asset Management