|
By Emily Sanders
Gwinnett Business Journal
March 2008
Do the following stereotypes sound familiar?
- Understanding how and why to invest money is a "man's job"
- Women aren't capable of understanding financial issues due to fear of math
Although changing, these perceptions still exist and could be detrimental to a woman's financial future.
It is especially important for women to become involved in the investment decisions that impact retirement funding because women tend to live longer than men – surprisingly, the average age of widowhood is 56. Combine that reality with the fact that married women are often younger than their spouses and the high divorce rate, and it is clear why women will manage their own money for 20 years, on average.
Given these circumstances, it is imperative that women learn the financial basics, know where assets are held and participate in the financial decision making process. What can women do to ensure they are knowledgeable about finances and have the resources needed to prepare for retirement, a spouse's death or divorce?
Women can begin by asking their spouses or financial advisors to share basic information regarding bank accounts, monthly bills and Federal and State taxes. Financial courses are often offered at community colleges, investment books are available and the internet offers a wealth of resources.
Women should educate themselves regarding the characteristics of various asset classes, such as equities or bonds, to understand how and when each asset class should be included in an investment portfolio and their specific risk profile. For example, the longer one's time horizon typically is, the larger the percentage of equity that is allocated to growth portfolios.
Another important consideration is to ensure that money is saved for the woman's retirement regardless of whether or not she is married or saving through her spouse's retirement plan. Often it is assumed that one's spouse's retirement savings will be adequate for both spouses' retirement, yet this isn't always the case.
Since financial services are normally tailored toward men (which may imply a more aggressive investing style), women need to advocate for an investment approach that utilizes a mixture of all asset classes and a more measured approach to trading. An investment portfolio allocated with long-term goals in mind rather than short-term trading profits will increase the likelihood of financial success.
In addition to being prepared, what can you do to encourage daughters and granddaughters to adequately prepare for their financial future? One suggestion is to give the gift of a financial planning session, placing them on a path towards a secure future.
Another idea is to provide annual contributions of up to $4,000 to a Roth IRA for five years – starting when the woman is 17 years old (assuming she has earned income) and continuing until age 22. This should yield a nest egg of approximately $1 million by age 65, which is especially vital since Social Security may be sharply curtailed for younger generations.
Sanders Financial Management, in conjunction with Pink Magazine, has developed and sponsored a unique contest, the Pink Million Dollar Stock Market Challenge (www.pinkstockchallenge .com), to assist women in increasing their knowledge of the U.S. financial system and factors that influence the economy. The challenge is a simulation in which 1,000 women nationwide each invest a hypothetical $1 million in stocks and closed-end mutual funds. Although valuable prizes are awarded, the competition's main goal is to provide financial education to women, translating into practical application.
The earlier a woman becomes involved in planning for her financial future and developing a comfortable level of financial literacy, the greater the likelihood of success.
|
