Women Face Unique Financial Planning Challenges
Women today manage many responsibilities such as caring for aging parents, managing children’s education and schedules, volunteering, and working full-time — whether inside or outside the home. With numerous demands on their time and energy, even women who are knowledgeable and equipped to make financial decisions find that their finances often fall to the bottom of their priority list.
While many women do feel empowered to handle day-to-day finances on their own, most women take a back seat when it comes to investment decisions and long-term financial planning. A 2018 study found that Millennial women — those born between 1981 and 1997 — are the most likely generation to defer to their spouses when it comes to financial decisions.[1] The same study found that some women let their spouses make long-term financial decisions either because they feel he’s more knowledgeable or they simply follow previous cultural norms and let men take the lead.
Overall, however, there are some positive trends emerging regarding women and their finances. Sixty-seven percent of women are now investing in areas other than retirement, which is up from 44% in 2018.[2] Fifty percent of women also report having more interest in investing since the start of the pandemic.
Whether making financial decisions feels comfortable or not, women face some unique challenges when managing their finances. Therefore, it is important for them to take an active role in their financial planning in order to navigate the future.
Factors that affect women’s finances
The gender wage gap is one financial obstacle women face. In 2020, it was reported that women earned 84% of what men earned based on median hourly earnings of both full- and part-time workers.[3] Although the gap is closing, it can still have an impact on women’s overall savings, Social Security retirement benefits, and pensions.
At the same time, women tend to live longer than men with an average life expectancy of 81 years, while men average 76 years.[4] This trend means women will likely need to stretch their retirement dollars further.
Cultural and behavioral norms can also affect women’s finances. Often women take time away from the workforce to raise children or care for aging parents, resulting in fewer years of earnings and less income to invest. Women also tend to invest less aggressively to minimize risk and prioritize stability, which can result in lower returns.
The recent pandemic posed additional challenges for women. The COVID-19 recession resulted in greater job losses among women than men with women disproportionately employed in occupations that require them to work on-site and in close proximity to others.[5] Women are also heavily represented in certain health care, food preparation, and personal service occupations that were sharply curtailed at the start of the pandemic.
It is estimated that women lost approximately $800 billion in income during the pandemic, in large part due to increased demands on their time at home.[6] Some research estimates that women also took on three times as much childcare during the pandemic.[7]
Considerations for Women
We believe it is important for women to engage in their families’ financial plan and goals. Women have a crucial voice to share and should occupy an equal seat at the financial table. Here are some steps women can take to help them feel more equipped and confident about managing their finances.
Develop financial literacy. It is important for women to know the basics of finance. Educational materials such as podcasts, videos, or financial publications are a good way to learn basic investment terminology. A trusted financial advisor can also provide resources or facilitate discussions to help increase financial literacy.
Start investing and saving sooner. To allow assets adequate time to grow, women need to begin investing and saving as soon as they can, and they likely need to save a higher percentage of their wages. Using the power of compounding, the earlier a person begins to invest, the more time assets have to grow—increasing the likelihood of meeting longer-term goals. However, women shouldn’t feel discouraged if they haven’t started saving and investing yet. It’s never too late to start. Now is the time!
Prioritize goals. Women often put the needs of others ahead of their own. For example, some women may put the goal of paying for their children’s college education ahead of saving for their retirement. This prioritization may seem like the right thing to do, but a woman is actually better off saving for her own retirement needs first. Her children may have access to other educational funding, such as scholarships and student loans, while she may only have limited time in the workforce to save for retirement.
Participate in the planning process. Blue Trust advisors are intentional about including both spouses in meetings and bringing the non-financially oriented spouse into the conversation. We believe both spouses should prepare for unexpected situations and know the contingency plans they have in place. To ensure one’s personal and financial wishes are carried out in the event of incapacity or death, consider executing basic estate planning documents, such as a will, trust, durable power of attorney, and health-care directive. Identifying individuals to serve in these key roles in advance will ease the transition. A Blue Trust advisor can help women sort through their options and make wise decisions.
Establish relationships with trusted advisors. Sudden transitions, such as divorce or widowhood, are often stressful. Having established relationships with trusted professionals, such as an estate attorney, a CPA, and a financial advisor, can help during these difficult times by providing stability and clarifying immediate responsibilities, which are often overwhelming. With a trusted advisor, women do not have to make decisions alone. Even if a woman was not previously involved in the financial planning process, a financial advisor can offer actionable steps to follow and assist with building a new financial plan for her future.
Ask as many questions as necessary. Women should make a strong effort to understand their financial status and feel confident asking questions. Knowledge is powerful and the more wisdom you obtain, the more confident you will become in managing your finances.
We have found that the perspective women provide to their personal and family’s financial planning is invaluable and critical to the success of their financial goals. Blue Trust considers it a privilege to work with women in all stages of life, and we pride ourselves on helping women gain the clarity and confidence they need to make wise financial decisions. To learn more about our resources for women, please visit www.bluetrust.com/library/women or contact your Blue Trust advisor.
[1] www.ubs.com/global/de/media/display-page-ndp/en-20180514-ubs-reveals-top-reason.html
[2] www.fidelity.com/FidelityInvestmentsWomen&InvestingStudy2021.pdf
[3] www.pewresearch.org/fact-tank/2021/05/25/gender-pay-gap-facts
[4] www.womenshealth.gov/30-achievements
[5] www.pewresearch.org/some-gender-disparities-widened-in-the-u-s-workforce-during-the-pandemic
[6] www.bloomberg.com/women-did-three-times-as-much-unpaid-child-care-as-men-during-covid-pandemic
[7] www.cgdev.org/publication/global-childcare-workload-school-and-preschool-closures-during-covid-19-pandemic