4 Ways Women Can Manage Their Money Better
Advice based on results of a recent Prudential financial survey
Kerry Hannon has covered personal finance for Forbes, Money, U.S. News & World Report and USA Today for nearly three decades. She's the author of Love Your Job: The New Rules for Career Happiness; What's Next? Follow Your Passion and Find Your Dream Job; Great Jobs for Everyone 50+ and Suddenly Single: Money Skills for Divorcees and Widows. Her website is kerryhannon.com. Follow her on Twitter @kerryhannon.
Drumroll, please. Prudential’s eighth biennial study on the Financial Experience & Behaviors Among Women was unveiled today and the news is this: Women feel no more prepared to make wise financial decisions today than they did two years ago — or even a decade ago.
Nor has their understanding of financial and insurance products improved. Not surprisingly, the “Confidence Gap” (the measure of women's confidence in their ability to attain their financial goals) has not improved over that 10-year span either, according to the disheartening findings.
While 75 percent of the 1,407 American women (age 25 to 68) polled said having enough money to maintain their lifestyle throughout retirement was very important, only 14 percent were very confident they will meet that goal. And just 20 percent said they felt prepared to make smart money moves.
Very Discouraging News
My head hit the desk.
What is it with women and financial literacy?
Wives are increasingly the breadwinners in their households (nearly half of the women surveyed) and the women surveyed said they adroitly direct their day-to-day money transactions. About a third gave themselves an “A” for their knowledge of managing money (33 percent) and debt (29 percent). Most gave themselves a nothing-to-sneeze-at B or B-.
(MORE: Hopeful Money News About Boomer Couples)
Although I was pleased that Prudential found boomer women were twice as likely to feel on track or ahead of schedule for financial and retirement planning as Gen X women and Millennials (46 percent vs. 26 and 27 percent respectively), their showing was still pretty pathetic.
Women Throw Up Their Hands
The basic takeaway, though, is that women, on the whole, still throw their hands up when it comes to making long-term financial decisions about saving and investing. For example, only 41 percent of women said they understand stocks and bonds well compared to 56 percent of men.
(MORE: Shrewd Money Advice for Women Over 50)
“Women don’t feel prepared to make wise decisions and are not sure what to consider when evaluating their options. They don’t seem to be taking action either,” said Lori Dickerson Fouché, Chief Executive Officer, Prudential Group Insurance, at a media briefing about the study.
That inertia will have serious implications for them.
Prudential’s findings aren’t groundbreaking, but they’re one more slap in the face that women are just not getting it.
In her recent New York Times article, Women to Wall Street: Are You Listening?, M.P. Dunleavey wrote that “many women are struggling to feel in control of their finances, given certain hurdles of their own. (Knowledge gaps + anxiety = shame.) Seventy-seven percent of women want to be involved in day-to-day investment decisions, a Merrill Lynch study found last fall, yet 72 percent say they ‘know less than the average investor’ about investing in general.”
Here are four of the Prudential survey’s findings that caught my eye, along with my advice for women concerning them:
1. Women said they have a lack of funds to invest. They felt one of their biggest barriers to reaching their long-term financial goals was not having enough disposable income to put toward them; 31 percent called this their top financial planning hurdle.
My advice: It doesn’t take much dough to get started. You can set up an automatic investment program between your checking account and an index fund (of the broad stock market) with as little as $50 a month. Many no-load funds will waive or lower their minimum initial investment if you sign up for this kind of ongoing plan.
Once you take this action, your investing confidence will begin to grow. Try it.
2. Women are failing to use online money-management tools and calculators. Only 18 percent of boomer women surveyed said they take advantage of these on a regular basis.
My advice: You can do better. Dive into the electronic arena to bone up on investing. Online tools are a great way to learn and to save time dealing with your financial life.
There’s lots of help available on the Internet, such as The National Endowment for Financial Education’s site, Smartaboutmoney.org, which has free guides that explain stocks, bonds and mutual funds. (Next Avenue has helpful articles from this group, too.)
Other general money sites I suggest you visit are Daily Worth and LearnVest. Another site I recommend for women is WISER, operated by the nonprofit Women’s Institute for a Secure Retirement. Check out its Investment 101 tutorial.
3. Women have a lack of familiarity with financial products and industry jargon. This isn't rocket science. And the truth is there are so many resources out there to help you get educated.
My advice: Your employer’s resources are a good place to start. Many companies and nonprofits offer workplace education and planning tools; some even underwrite lunch-and-learn sessions or bring in outside financial advisers to give talks.
Tap into your social media accounts, too, for money-management articles and insights. I was pleased to see in the Prudential study that women are beginning to see social media as a financial research tool; 12 percent said they use the sites for that purpose.
When asked which social media sites they’d trust most to learn about financial issues or products or to evaluate financial companies, Facebook won the most votes from boomer women (31 percent), followed by LinkedIn, YouTube and Twitter.
4. Women feel financial advisers don’t “get” them. Only one in five women surveyed believed the financial services industry truly understands their needs (the same percentage as men, interestingly).
Little wonder, then, that just 31 percent of women surveyed use a financial professional, down markedly from 48 percent in 2008. "It's shocking, surprising and admittedly disappointing," said Dickerson Fouché.
The numbers, I’m glad to say, were better for boomer women: 45 percent of them said they use a financial professional.
Some women surveyed don’t work with money pros, however, because they feel they don’t have sufficient assets or the advisers’ fees are too high.
“There's a big misconception that you have to have certain amount of assets or income, or ‘I’ll have to pay a huge price to hire a financial adviser,’ said Lynnette Khalfani-Cox (“The Money Coach”) at Prudential’s panel discussion. “I tell people you can’t afford not to have a financial adviser.”
My advice: Stop making excuses for not working with a financial adviser. Some do take middle-income clients and have reasonable fees.
Interview a few (there are searchable databases at sites of the National Association of Personal Financial Advisors, the Financial Planning Association and the Certified Financial Planner Board of Standards), find one you like and then don’t be shy about asking the questions you need to make sense of it all.
You’re accountable for your own financial future. Take ownership.