In his best-selling book, Men are From Mars, Women are From Venus, John Gray, Ph.D., talks about men “going to their caves.” When it comes to financial planning, both genders can be guilty of retreating from difficult situations.
For women, though, this can be particularly harmful to their financial futures.
Women Live Longer Than Men
Women, on average, live longer. We’ve heard this before, but this fact does matter when it comes to saving and investing. In 2012, the Institute for Health Metrics and Evaluation found that men live an average of 76.2 years versus 81.3 years for women.1 What does this mean for women? It means that the average woman’s retirement savings should outlast that of her male peers by five years. This is significant! So, what should women do to address this gap? Women need to save more, start saving earlier, and invest more aggressively early on.
Generally, women tend to be less willing to take on investment risk than men. Taking on lower risk may lead to lower average rates of return on their investments over the long-term. If this is the case, women may need to save even more for retirement.
Women Should Take Care of Themselves First
Women are more likely to help others before they help themselves.
Some examples include:
- Saving for their children’s college costs rather than their own retirement;
- Financially supporting their parents, children, or grandchildren; and
- Spending time out of the workforce to care for children, grandchildren, or elderly parents.
Often, women who spend time out of the workforce are likely not saving and investing for themselves. Worse yet, they may be living off of their savings at an age when they should be investing in their future.
Keep Spending Under Control
Women sometimes fault men for spending money on their “toys” – such as snowmobiles, jet skis, fancy BBQ grills, or whatever. But, we have our vices too – whether they’re daily lattes, weekly manicures, designer handbags, or regular shopping sprees. If we’re not careful, we can easily let our spending get out of control.
Stick to a Budget
The good news is that women, more often than men, control the family budget as they do most of the shopping and bill paying. We have the power to make a difference in this area. Working with a financial planner to find out how much we need to save, and how much we can safely spend (while sticking to a budget), will go a long way.
Work With a Financial Planner
According to a 2007 study on gender differences, women are less likely to be educated in financial matters, and they are more likely than men to find investment decisions stressful, difficult and time-consuming.2 Not all women lack financial skills, of course, but many simply lack the time between their jobs and caring for their family. Therefore, women can benefit from finding a qualified financial planner to partner with them and provide sound financial advice.
Start Saving Early
What else can women do? The advice is the same for men and women alike. I always say it’s simple, but it’s not easy. Begin saving for your future as early as possible. Save as much as you can reasonably afford. And don’t just save what is “left over” at the end of the month. As clichéd as it sounds, “pay yourself first.” Treat your savings contributions as a bill you need to pay and make it a high priority in your monthly budget. Invest in a broadly diversified portfolio of stocks and bonds. If you’re not well versed in the principles of investing, hire an independent investment advisor to manage your portfolio. Seek the help of a Certified Financial Planner® to map out your financial future, so you can stay on the right path. If your current path falls short of your goals, your planner can help you get back on track.
Make It Fun!
Now that we know how to start planning ahead, how can we make it more fun for women? Studies show that women prefer to learn about money in person or in groups with others in their situation. Keeping this in mind, here are a few ideas to consider:
- Host a monthly girl’s night out and invite speakers to educate the group on financial matters.
- Set financial goals along with your girl friends and plan rewards for those who meet their goals.
- Start a book club that focuses on financial planning books.