Women & money: We need more talk & A LOT more action!

Growing up my mother imparted to me what she believed were the foundations for a healthy financial life. Work hard, pay myself first and never spend more than I made. What my mom didn’t tell me—and what most people don’t acknowledge—is that there are some fundamental differences between the financial lives of women and men.

The reality is that women experience a financial lifetime of gaps starting with the discrepancy in pay, that compounds every step of the way, resulting in less money saved for retirement and increased risk for financial hardship as women age. As we celebrate Women’s History Month, let’s consider two ways to help improve the financial lives of women.

Normalize Money Talk: Women don’t like to talk about money. A Merrill Lynch study found that 61% of women said they would rather discuss the details of their own death than money. Maybe it’s the worry that we are lacking in knowledge on the subject or that we aren’t confident in our money management skills. Or maybe, it was just never a topic of conversation when we were growing up. The reasons are many, but this lack of comfort when it comes to discussing finances is affecting our financial lives today and far into the future.

When I first started my career in credit unions, I had a mentor who was candid with me about taking control of my financial life. He’d ask me what my plan was for my bonus and at the start of each year, he’d ask me what was my new goal for saving for retirement. At first, these questions felt a little odd, but then I realized as we talked that he didn’t care what my plan for my bonus was or the amount of my retirement savings goal for the year. He just wanted me to HAVE a plan and a goal. To this day, I still follow many of the pieces of advice he gave me and I am eternally grateful that he cared enough to ask. His simple questions helped bring to the forefront conversations about money and increased my confidence to be forthright and candid in financial discussions.

Normalizing the conversation will help women live better financial lives. Sharing is caring, especially when it comes to financial health. Ask the women around you how they are doing toward setting and achieving their financial goals. Make talking about finances a topic of normal, everyday conversation. The health of women’s financial lives depends on it.

Get in the Game: “You miss every shot you don’t take” said hockey legend Wayne Gretzky. It’s pretty simple when you think about it that way. You can’t make the shot if you are not willing to take it. The example should be broadened when it comes to women and finances. More often than not, women aren’t even willing to get on the ice.

When looking at investment behaviors, women are considerably more risk-averse than their male counterparts. A 2019 BlackRock study found that women keep 71% of their assets in cash compared to men who hold 60%. The reason for this investment difference likely goes back to the pay gap shaping women’s financial lives. A female colleague of mine summed up her risk aversion when asked why she was so conservative in her investing approach. She said, “With it being so hard to make the money, I don’t feel that I can afford to lose what I have.”

This risk intolerance adds up to a considerable detriment to women’s financial lives. The zero-risk associated with cash also means zero-potential to grow wealth through investments. Ironically, a 2016 Fidelity study found that once women do invest, they outperform men by nearly one percentage point a year. Why? Because women tend to employ the buy-and-hold strategy when it comes to stocks more often than men, which pays off over time.  To overcome our risk aversion, women need to get in the game. We need to understand our level of risk tolerance, set our priorities and goals and then take our shots!

Normalizing discussions around money and helping women to understand and overcome their risk aversions are two ways that all of us can help to improve the financial lives of women.