3 Major Financial Planning Issues Facing Women

by Emily Guy Birken · 15 comments

There’s no denying that men and women often view financial planning from different perspectives. The reasons are varied – everything from cultural expectations to practical considerations. And while most financial advice isn’t gender-specific, it’s clear that ignoring the differences between how men and women plan for their financial futures can put women at a disadvantage. After all, most financial advice being circulated are written by men and therefore often reflect their perspective of how to best tackle the issue.

Here are three money issues that often affect women, and how you can work around them:

1. Women live longer and tend to make less money

The pay gap between men and women has been news for what seems like forever. It’s disheartening, to say the least, that women still earn about 20% less than men do for the same job. This means women are already at a financial disadvantage in planning for retirement, as they have less money to put aside.

Add to that the heartbreaking statistic that “80 percent of men die married and 80 percent of women die single,” and it’s clear that women have a big potential problem in planning for their financial future. Namely, they have to plan for a longer amount of time and will have less money to put away.

Farnoosh Torabi, author of When She Makes More, suggests that women should plan on being very aggressive with their retirement savings: “We need to make sure that we’re really stocking our 401Ks, that we’re doing everything we can to protect ourselves, that we have disability insurance, and that we take full ownership of our income.”

Unfortunately, this is easier said than done, with one reason being how women often view their money.

Take control

2. Women tend to think of their money as benefiting their family

Women are often culturally encouraged to share their income with their families. On the surface, there’s absolutely nothing wrong with this: of course, you want to spend your income on your children or to help out your elderly parents.

The problem arises when a woman continues to feel responsible for family finances while neglecting her own financial future. She may feel as though she has no choice but to send money to her adult children, help pay for their college education, or bankroll her parents’ retirement.

Remember the standard airline advice to put on your own oxygen mask before assisting your child? It’s also sound advice for women planning their financial future. You can’t help your family if you’re struggling, so take care of yourself before offering a hand to your family. It may feel cruel, but it is better for everyone.

It’s David here. I’d like to think that I care about my family quite a bit too, so it’s sad to admit that this is a fact. However, women taking care of their family financially better than men is more than a subjective opinion. When we went to set up our trust a few years back, our lawyer told us to protect the assets so that in the event one of us dies, that the deceased half is protected and untouchable by the second marriage’s family. He said it rarely happens to the wives who then remarry, but he’s seen way too many men let his second wife withhold funds that the husband earned jointly with his deceased first wife from the kids in the first marriage.

I was actually a little offended he suggested that this scenario can play out for us to be honest. Doing that is unthinkable to me, especially because those kids he’s referring to are MY kids too. Why in the world would I see my own kids struggle while a second wife freely spends my and Emma’s money on not just her but maybe even her kids from another marriage? But as Morgan Freeman eloquently wrote in his letter to Jack Nicholson in the movie The Bucket List, “You once said you’re not everyone. Well, that’s true-you’re certainly not everyone, but everyone is everyone.”

Who am I to argue with the lawyer who’s handled thousands, if not tens of thousands of trusts and money issues dealing with second, third, and maybe even fourth marriages in his decades-long career?

But enough of this side note, I’ll let Emily take back over…

3. Women are often intimidated by investing

Many behavioral finance studies have shown that women tend to have less confidence when it comes to investing than men do. A Prudential Financial study on the phenomenon referred to it as “the confidence gap,” and it can severely hinder a woman’s investment portfolio. According to NASDAQ.com, “Women’s lack of confidence can lead to inertia when making investment decisions, aggravating women’s tendency to underinvest in risky assets.”

On the other hand, women tend to stay the course and not make as many stock trades as men. And if the pandemic has taught us anything, it’s that no one can really predict future moves consistently. Stay the course, because that gives you the best chance of success.

If you don’t feel confident about your ability to make good investments, partner with a trusted financial adviser. Even if you never feel as though you can pick your investments by yourself, a smart and trusted adviser can help you realize your goals without having to step too far outside your comfort zone. (Though don’t forget to vet your prospective advisers before working with them!)

The most important thing to remember? No one else will care about your financial future as much as you do, so make investing in your future a top priority.

Do you think that women deal with finances differently than men? As a woman, how do you address these specific issues?

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{ read the comments below or add one }

  • Property Marbella says:

    Women think differently and are more careful than men usually. As women invest in secure low-risk stocks, home in a stable residential area, etc. And unfortunately, they are better than us men in investments.

    • David @ MoneyNing.com says:

      I heard that women doesn’t necessarily invest in lower risk stocks, but they, as a group, trade much less frequently than men. I suspect the fewer emotionally driven trades are the primary reason why women managed portfolios tend to outperform men managed ones.

  • AthenaC says:

    It’s always interesting to me to read “women do this” or “men do that.” In my family, I’m the breadwinner and the money manager. I’m responsible for making the money, saving for retirement, budgeting … everything.

    My husband takes care of the house and kids and is always wishing we had more money to spend. It’s an interesting dynamic.

    • David @ MoneyNing.com says:

      Thanks for the perspective. I always thought it’s more the circumstances that drive behavior rather than which gender you happen to be.

      We are more traditional, and completely the opposite as you since I’m the breadwinner, and handling practically all money matters while my wife takes care of the kids.

      I could say she sometimes wishes we had more money, but so do I sometimes.

      • AthenaC says:

        “I always thought it’s more the circumstances that drive behavior rather than which gender you happen to be.”

        I definitely agree with this. Part of me gets a little nervous when I see headings like “here are things women do” because a lot of those types of articles seem to contain the implicit assumption that things women do are wrong (to the extent they are different than the things men do). This article really wasn’t negative like that.

        Like I mentioned above, I’m outside the norm for pretty much everything so I don’t like it when people assume things about me because I happen to be female. Not that it’s a problem here. And you’re right – observing and unpacking gender-specific (and age-specific, and culture-specific, etc.) trends is interesting.

        • Emily Guy Birken says:

          “Part of me gets a little nervous when I see headings like “here are things women do” because a lot of those types of articles seem to contain the implicit assumption that things women do are wrong (to the extent they are different than the things men do).”

          Athena, I know exactly what you mean with this. I work hard to avoid those kind of assumptions for anyone, but they can be difficult to recognize in oneself!

        • David @ MoneyNing.com says:

          I know it’s harder when the roles are switched because there are many people close to me who have a female breadwinner and I see the situation first hand. You are doing what works best for your family and that’s ultimately what’s important. At the end of the day, you are the one who gets to keep the fruits of your labor!

    • Emily Guy Birken says:

      I agree, Athena. It’s impossible to generalize about a population that includes half the planet. But there do tend to be trends among (American) women that are interesting to examine and important to unpack to make sure that a significant portion of women (or men) are not hurting their financial futures.

      • AthenaC says:

        You’re correct, of course. I didn’t mean to sound as short as I did.

        I can’t think of any time where I’ve been within the norm of “what women do” so I’m as interested as anyone in what’s “normal” for women.

      • David @ MoneyNing.com says:

        The trends ARE important because offering a platform for everybody to talk about the matter helps more understand the situation they find themselves in. Thanks for the article Emily.

  • David says:

    By the way, women do tend to live long. My solution? Find a younger man!

    • David @ MoneyNing.com says:

      That’s the perfect solution David. But then I know some wives who complain about their husbands. In those cases, they may not want a younger man!

  • Aldo says:

    I do believe that women deal with finances different than men. They tend to be better at saving money but not as aggressive investing it. Perhaps is the confidence issue, like you mentioned, or maybe give it more thought to losing their hard earned money. Men are a little crazy by nature, we don’t worry too much about our own safety by doing stupid stunts, so investing in the roller coaster of the stock market is really not a big deal.

    Women tend to be safer about everything and maybe that’s why they live longer. They don’t usually get hurt doing double back flips on dirt bikes because they are just smarter than that.

    • David says:

      It’s always dangerous to discuss how different genders do things differently, but, speaking from personal experience, women tend to be more conservative because they are saving the money for the entire family as Emily pointed out. This is not that say that men are not saving for the entire family.

    • David @ MoneyNing.com says:

      I must be an outlier because I’m an aggressive saver. Everyone is wired differently though, so it’s hard to generalize.

      I think we see the patterns of women saving more because their circumstances are different than men. Most women, like Emily pointed out, make less and therefore think about conserving more.

      As the pendulum shifts towards equality in our society, I believe things will start evening out more.

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