Why Women Should March Towards Financial Independence

Abigail Adams statue, Boston. Photo credit: bostonzest.com

Abigail Adams statue, Boston, Mass. Photo credit: bostonzest.com

March is women’s history month. More than a century before women were given the right to vote, Abigail Adams became one of the first major female investors in American history. America’s second First Lady, she managed the family finances and did so quite well, accumulating a sizable estate through bond trading and other shrewd investments.

Her story may not sound all that unusual in today’s modern world where a growing number of women are self-made billionaires, but even in the 21st century women still find themselves facing a considerable gap compared to men when it comes to financial matters.

Merrill Lynch found that, 55% of women they surveyed believe they “know less than the average investor about financial markets and investing in general” — compared to about 27% of men who were asked the same question.

A study funded by Allianz Life titled Women, Money and Power found that only 10% of women feel “extremely secure” financially and more than half say that “the fear of running out of money is what keeps them up at night”.

In her book, Lean In, Sheryl Sandberg states, “We hold ourselves back in ways both big and small, by lacking self-confidence, by not raising our hands, and by pulling back when we should be leaning in.”

This observation doesn’t apply exclusively to women’s professional lives. It also applies to their financial lives as well. The income gap between men and women is well documented; however, the investment gap between the genders needs to be closed as well.

Most of my financial planning clients include households in which the female is the primary or joint decision-maker regarding long-term financial matters. However, there are too many families I see in which women are not actively engaged in their finances.

Other research supports this. Blackrock, a global investment company managing over $5 trillion, found that among women between the ages 55-64 only 46% had any interest in investing.

While that obviously doesn’t describe all women, I believe that more women should lean in to the important task of managing their financial future. Here are 3 reasons why:

Women tend to live longer than men. This fact isn’t exactly breaking news. How much longer women live depends on a variety of factors, but the trend has been in place for a long time. According to the Social Security Administration, women age 65 today can expect to live to age 86.6 and approximately 1/3 of them will see age 90; whereas, men can expect to live to age 84.3 but only about one in five will live to age 90.

To get an idea of how long you might live, check out the life expectancy calculator on the Social Security Administration’s website.

There is an overwhelming likelihood that someday you will be in charge. 80% of all day-to-day household spending is determined by women, yet many women still delegate their long-term financial planning and investment decisions to their husbands. Often these women are completely disengaged from the process.

This is a big mistake.

Researchers estimate that up to 90% of all women will be in charge of their household finances at some point in their lives. Not only do women live longer than men, they also tend to marry men that are older than them making it even more likely that they will outlive their spouse. In addition, divorce rates among people age 60 and older are at all time highs.

Even if the 90% figure isn’t 100% accurate, it’s reasonable to assume that there is a high probability that one day, by choice or circumstance, you will be responsible for managing not only your finances but also that of your family as well. 75% of all women will be widowed at least once in their lifetime and the average age at which a woman becomes a widow — 56.

Women have more at stake. Women will inherit tens of trillions of dollars over the coming decades and control an increasing percentage of the economic pie. Yet the National Institute on Retirement Security finds that today’s “women are 80% more likely to be impoverished in retirement than men.”

The life expectancy difference between women and men is just part of the problem. When you consider that women tend to have fewer years in the workforce, earn less than men over their lifetime, and generally have less access to retirement savings plans (and employer-based matching contributions) than men, it starts to add up.

Less time to save, less money to set aside for retirement, and a longer period that retirement savings must last makes a big difference over time.

The shift is on. Women control a greater share of the nation’s total wealth and economic power than ever before. Statistics and demographic trends indicate that this trend will continue for years to come.

Investing and personal finance don’t have to be difficult, scary or complicated. Designate the month of March as the time you decide to march towards financial independence.

In my next blog post you will learn how women can become more engaged in their personal finances and begin to close the investment gap.