Women may be making their mark in the workplace, but they still have a lot to learn when it comes to money and investing, writes Donna Block
There’s no doubt about it – women are making their mark in the bastions that were once only open to the male of the species. They have finally broken through the proverbial glass ceiling to become the MDs of big corporations, hold all manner of political office and, whether in the workplace, in the community or on the home- front, be a force to be reckoned with.
Nonetheless, with all the strides women have made, for some reason money and investing remain major stumbling blocks and are at the top of the list of problems that they need to solve. In spite of all their achievements and the research data showing women to be savvy, in some cases the savviest of investors, they still have more dismal financial prospects than their brothers and husbands.
So what’s the problem? There seems to be a few of them, but the most common one is fear. Fear plays a big part in women’s reluctance to take control of their own financial lives.
“Women have tended to be their own worst enemies,” said Dr Christopher Hayes, executive director of the National Centre for Women and Retirement Research. “Women’s skills and abilities are no different from men’s but they put a tremendous pressure on themselves to make perfect investment decisions.”
This pressure women put on themselves is manifested in the kinds of investment choices they make.
According to a survey done by United States investment giant Sun America, women are much more likely to choose investments, such as bonds, which provide a guaranteed return but offer lower yields than stocks. Many women are terrified at the prospect of making investment decisions and become panicky if they have to contemplate putting money at risk.
On the other hand, a number of women appear to be perfectly happy playing the role of Scarlett O’Hara and thinking about what do to with their money “tomorrow”. This kind of attitude is compatible with helplessness, and helplessness always pays off, but let’s get real – that only happens in the movies. Having Rhett Butler by your side isn’t going to help in making good investment decisions.
Fear may be the number one problem, but women also have a number of other issues to deal with.
They put their careers on hold to raise children and many times put their spouses through school. This reduces their earnings, delays qualification for promotions and retirement benefits, and increases the number of years in which they are not making contributions to retirement accounts.
On average, women earn three-quarters of the salary men earn for the same job, and live longer, so they have to stretch less money further. Possibly as a result, they are overly cautious about money, invest too conservatively and tend to rely too much on advice from so-called experts who may not have their best interests at heart.
Women more than men tend to ask for investment advice from a professional. If the investment adviser is knowledgable and gets a solid investment plan off the ground, that can be good news. But for many women who are just starting to focus on finances, be forewarned: the brokerage and mutual fund industries have targeted women as a rich source of potential client wealth.
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The wrong investment plan can have devastating effects, and even a good plan cannot compensate for the workplace and family issues that can shortchange a woman’s future.
What should smart, concerned women do? Everyone has different priorities so first and foremost figure out what they are. Here are some starting points.
l Learn as much as possible about money and how it works in the markets. A little Net surfing or a visit to the library will go a long way. Even if you do decide to trust an adviser with your financial future, you won’t know whether you have a good one unless you know what they are talking about.
l Join an investment club (one run by women) or learn on your own. There are Internet sites and business publications by the thousands that will help you find your way around unit trusts and shares.
l Set aside some of your income to invest every month. Even the smallest amount will grow over time.
l Use time away from your career as profitably as possible. If you are staying home with the kids, use some of that time to keep up workplace skills or, if possible, take time to learn new ones. Keep your hand in by staying in touch with contacts and old work friends, or do a bit of consulting. Chances are if you are not working now, you will go back to work. Plan ahead so that you can return to work without having to start at the bottom rung of the ladder financially.
l Do as much retirement saving as possible, even if you are not working. At a minimum, that means contributing something, anything, to a retirement account. Start saving today and make sure this gets done. Slow but steady early savers do much better over the long haul than big-money late starters because of the magic of growth and compound interest. But no matter, if you have never saved a cent it’s not too late.
l Know your real worth at the office and do not be afraid to ask for it. Women too grateful to employers for those afternoons off to take care of sick kids may work for less than they should. If a man were in the same position, chances are he would not work for a lower salary.
l Be very careful about divorce settlements. There is still a huge financial gap between women in marriages and women who are not married, even when age and other factors are taken out of the equation.
Marriage is financially healthy for men and women, but divorce continues to devastate women financially. If you are divorcing, spend what you have to make sure all assets including those crucial retirement assets are equitably divided.
l Be confident and get your questions answered. Avoid advisers who are patronising, talk in “geek speak” or act as if a question is stupid. Maybe they just don’t want to explain what they are doing, and maybe they can’t.