Women and Finances: Mastering Your Money

Women are more in control of their careers and finances than ever before. Matters that were once “men’s” concerns have become just as important, if not more, to women.

Just over 58 percent of women are currently in the U.S. workforce and account for 51 percent of all persons employed in management, professional, and related positions. American women hold 89 percent of all U.S. bank accounts and are worth more than $5 trillion in consumer spending power. They also control or influence 67 percent of household investment decisions.

Still women continue to lag behind men in actions crucial to building wealth and security, such as investing and other long-term money plans.

Women and Finances Mastering Your Money

Overcoming Financial Insecurity

A recent BlackRock survey revealed that women are more concerned than men about immediate financial needs – and are more likely than men to overlook longer-term financial priorities, like planning effectively for their retirement. The survey found that women are way more likely than men to choose negative terms like “nervous,” “frustrated,” and “pessimistic” to describe their finances, which could prevent women from taking risks to increase their financial fortunes.

Another survey by Prudential uncovered that women are far less confident about making wise financial decisions and are twice as likely as men to describe themselves as financial ‘beginners.’ The majority of women (70%) see themselves as savers rather than investors, while the opposite is true for men. While women are confident in their ability to achieve certain financial goals – like buying a home and reducing debt – they are insecure about investments and having enough money in retirement.

Confidence issues may be holding women back from taking risks with their money and saving for retirement. According to the U.S. Department of Labor, of the 62 million wage and salaried women (age 21 to 64) working in the United States, just 45 percent participated in a retirement plan. The figures are a bit ironic when you consider women commonly live longer and need to save more to fund their retirement.

Pessimism Can Be Beneficial

Despite women’s negative impressions of their savings, investing and money management skills – a lack of confidence can actually be a benefit.

study by University of California at Berkley finance professors Brad Barber and Terrance Odean found that in areas of finance, men tend towards overconfidence with expected gains in trading and overestimate the precision of their information. The study uncovered that men may even trade when the true expected net gain is negative. By trading more and being overconfident, men actually hurt their performance more than women.

“Overconfidence undermines the financial progress of men, whereas a more conservative approach by women often leads to better results,” says Greg McBride, chief financial analyst with Bankrate.com.

The BlackRock survey also indicated that women are more likely to emphasize strengthening day-to-day financial security via saving and debt reduction and are highly realistic about the financial state of the world and their own households.

“Simply put, when it comes to money, women and men today see the world quite differently,” said Sue Thompson, Managing Director and Head of the Institutional Asset Management and RIA Channel at BlackRock.

Building Financial Confidence

If you’re not where you want to be financially, equip yourself with relevant knowledge to achieve both confidence and long-term goals. When it comes to money, there is no such thing as a stupid question and successful financial management is unlikely without a plan.

Here are some must-do steps to take control of your finances.

  • Always know your financial situation: Whether you are by yourself or joined with a partner, never resign responsibility to another person.
  • Save, Save, Save: Women must save more than men. We generally live longer and our careers are likely to be interrupted because of responsibilities as the primary caregiver for children, or even for parents.
  • Plan for retirement: If your employer offers a retirement savings plan, take advantage of it. If not, you pay want to consider putting a portion of your income into an individual retirement account (IRA).
  • Take inventory: Start by looking at your savings and investment accounts: their balances and purposes. Take inventory of all sources of current income and plan for the future.
  • Ask for directions: Consider working with a financial advisor. Many financial firms offer educational seminars to help teach people about what vehicles are out there to help you plan for your financial future. Experienced advisors will not only help you identify your goals and assess your financial situation, they can help answer any questions you have regarding potential investments.
  • Don’t procrastinate: Many women will postpone their needs to take care of the people around them. Women will often fund their children’s education before their own retirement or loan money to relatives. Make your finances a priority and think long-term.

To celebrate Women’s History Month, we’ll discuss the relationship women have with money and their personal finances during our March 25 TweetChat, entitled “Women and Finances,” co-hosted by Bankrate.com. Please join us for an in-depth conversation about how women can alleviate their financial fears and take control of their financial life.

In the meantime, how do you plan to overcome your fears, gain confidence and rule your financial life?

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