By 2030, American women will own much of the $30 trillion in financial assets baby boomers will possess, a substantial forecasted increase from the roughly one-third of total US household assets women dominate today.
Despite persistent barriers, American women are making substantial progress in finance, and the future of women's wealth is bright.
Women's wealth is growing in the US, reports investment bank Morgan Stanley
This coming transfer signals a potentially enormous sea change for the broader financial services industry. Financial planning is crucial for everyone, but especially for women. A persistent gender pay gap, greater caregiving responsibilities, and longer life expectancy are just a few of the unique obstacles most women will face throughout their financial journey.
This article will look at some of the unique money challenges women face when it comes to money and canvas some opinions from female-focused financial planners on the subject.
Money and Meaning
Effectively women-oriented finance usually requires upending some underlying assumptions about the goals of money management that have been traditionally geared toward male clientele and getting in sync with women's values when it comes to finance.
“Women tend to have a different view of money from men, and different priorities in putting it to work,” says Stephanie McCullough, CFP and Founder of Sofia Financial. “We prioritize what the money can do for us and our loved ones, especially around financial independence and self-determination, supporting our families, and making the world a better place. I see every day that women have lower confidence in the areas of money and investing, even though research shows women tend to be better investors!”
Indeed in 2021, Fidelity Investments performed an in-depth analysis of more than 5 million accounts and found that, over the previous ten years, women, on average, outperformed their male counterparts by 0.4%. Add to this an increasing share of assets, and women are becoming increasingly empowered to take control of their finances and their lives. Yet the potential for female financial independence can get more complicated when it comes to relationships.
Better Together?
Although having a partner can offer financial support for many, the transition from singlehood into a relationship can also cause some difficulty.
“The biggest challenge I see for women as they move from managing their finances on their own to combining their lives with a partner is when they have a different money story or background with their partner, leading to misunderstandings and challenges with creating financial plans together,” says Kelley Long, CFP and Founder of Financial Bliss with Kelley Long. “It's important to remember that part of getting to know each other is exploring why you each behave with money the way you do, as money decisions often reflect other fears, beliefs and experiences that haven't yet been explicitly discussed.”
These conversations can be tough to navigate alone, especially for couples who are deeply set in destructive financial habits and may require financial advisors to work through issues.
Couples finance has gained much media attention in recent years. Financial guru Ramit Sethi's popular podcast, I Will Teach You to Be Rich (which recently launched as a Netflix series), focuses on healing financial rifts between couples. Each long-form episode takes a deep dive into the couple's economic life and probes each person's divergent attitudes toward money. Oftentimes, the breakdown happens due to a misalignment around gender roles and the correlating money dynamics.
Some couples may be better served with a so-called “Female-led Relationship” (or FLR), a broad, catch-all term that refers to a partnership where the woman makes all or most of the decisions within the relationship and exerts more authority in the relationship. When it comes to money, this may involve taking the lead in budgeting, spending and investing.
Divorce Decisions
Divorce can present a financial minefield for many women. Coming out the other side can present a mixed picture. Depending on circumstances, women may lose financial support from their former partner, yet they may also relish a chance to restart newfound freedom over their money.
Chris Chen, CFP and Wealth Strategist at Insight Financial Strategists, is a Certified Divorce Financial Analyst (CDFA) and one of a number of financial advisors who coach divorced women.
“I help them understand the long-term consequences of the decisions that they are making during the divorce,” he says. “That is particularly important because on average women outlive men, are more likely to need Long Term Care, and typically retire with less assets and income.”
Going through the settlement negotiations or court proceedings is only half the battle. Even if divorced women secure a share of their former partner's investment fund, there may be a steep learning curve in managing the portfolio.
“A big challenge I've witnessed with women after a divorce is figuring out how to reinvest funds that were split from investment accounts as part of the divorce settlement,” says Dawn Mabery Chestnut, CFP and Founder & CEO of Mabery Consulting. “This is especially true when the former husband handled all of the investments. Basic investment education and risk assessment for the now single woman are typically the first steps to getting those funds reinvested properly.”
This points to the need for ongoing upskilling and learning of financial knowledge and investing acumen tailored toward women's needs. Considering that 80% of men die married, but 80% of women die single, there is no end to the need for women across their lifetime.
Ultimately, there are many instances in which effective planning can help women overcome the unique financial hurdles they will face throughout their lives. Through learning and partnering with specialist female finance experts who coach women through various phases of life, women can get access to the tools they need to forge their own financial path and improve their overall life fulfillment.
This article was produced and syndicated by Wealth of Geeks.