3 Ways Women Shortchange Themselves Financially

by Emily Guy Birken · 7 comments

women and finances

In many ways, women are in a strange financial place in the 21st century. Four in ten families now rely on Mom as the main breadwinner, and more women than men are graduating from college. Women’s financial responsibilities and opportunities are growing — but women’s attitudes towards finances have been much slower to change.

And because of that disconnect, there are often times when women shoot themselves in the foot financially.

Here are three common mistakes that many women make when it comes to handling their finances:

1. Skimping on Life Insurance

Even though I’m both a personal finance writer and the unofficial head of finances in my family, I’ve personally made this easy mistake. Since I work from home and my income is significantly lower than my husband’s, for several years I only carried the bare minimum of life insurance on myself. Many stay-at-home moms are in a similar situation — thinking that life insurance is all about replacing lost income.

Not only does that overlook all of the work that a stay-at-home spouse takes care of — which would have to be paid for if she were no longer there — it also ignores the fact that a family would need a financial cushion to allow everyone to overcome their grief.

If the unthinkable happened, your kids would need more attention and care from your spouse, and being under-insured means he would have to continue working at the same (or higher) level just to maintain your standard of living. Life insurance is about more than just replacing income; it’s also about providing breathing room for a family in crisis.

2. Thinking They Don’t Know Anything About Money

Women are socialized to defer to others when it comes to subjects they aren’t knowledgeable about. (And in many cases, women will politely listen and defer to those who actually know less than they do, for fear of coming across as overbearing.) Between that deeply-ingrained socialization and the fear of doing or saying something stupid, women will often allow others, particularly the men in their lives, to make important financial decisions because they feel like they don’t know enough.

Here’s the thing: Suze Orman and Warren Buffett were both once ignorant beginners, as well. It’s much savvier to learn about your financial options and ask the stupid questions, rather than allow someone else to make decisions without your input. Remember that a question is only truly stupid if you never ask it.

3. Not Setting Boundaries

I think of this as “‘The Giving Tree’ effect,” named after the famous children’s book by Shel Silverstein — in which the tree gives and gives to the boy she loves until nothing is left of her but a stump.

Mothers in particular can easily fall into this trap, because it can be so hard to watch one’s children struggle financially. But women have also been known to give money they can’t afford to lose to boyfriends, friends, parents, and siblings, because they want to make the other person happy.

We all want to feel generous and make the lives of our loved ones easier. But just as there’s a reason for putting on your own oxygen mask on a plane prior to helping your children, you have to remember that you’re not truly helping anyone if you yourself can’t survive because of your giving.

Set up boundaries for yourself, and enforce them. Money and emotion may be closely tied, but there’s no need for anyone to guilt you into giving money when you don’t want or can’t afford to.

The Bottom Line

Even though women’s financial roles are much different now than they were in our grandmothers’ time, many of us are still hesitant about taking charge of our financial lives. But just as you wouldn’t allow someone else to make decisions about your health, you can’t allow others to dictate your finances. We all need to be proactive and responsible with our financial freedom.

Do you think there are any other ways that women shortchange themselves financially? 

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  • Latisha Millard says:

    Thank you for this article. I was never pushed to be financially inclined. I watched my mother remain in an unhappy situation because she did not have the ability to maintain herself, if she left. I spent my young adult years either ignoring or delegating my financial situation to others that did not have my best interest at heart. As a result I squandered opportunities that would have allowed me to get ahead financially. I took the time in my 40’s to start educating myself financially and offer the opportunities to my friends that are in a similar situation. I take my learnings as a lesson to teach my children different.

  • Caroline says:

    yes! This is a huge factor in how the second-income partner (often the woman but not necessarily) contributes in a financially meaningful way. It’s not just the actual money income, but the husbanding of the family money for best advantage to the family concerned. You can earn a million a month, but if you blow it all on inconsequential things, it means nothing. Taking care of the money you have, be it a large amount of not is massively overlooked and under-appreciated, and often – I know this is sexist – it’s the woman of the house who steers this ship.

  • DNN says:

    People can save money by being frugal and use that money to fund business ventures to achieve “side hustle millionaire” status.

  • Lifeisdynamic says:

    As a senior middle-aged woman, a nurse, wife, mother, daughter, sister and loads of experience of providing and giving, I could not agree with you more, Emily!! Women traditionally, are the care-givers and this includes providing for or sharing. Ingrained culture. It has also meant women do not have an opinion of or need to know about economics, finance or money. These are the stuff of a man’s world along with sport. However, the men have long since lost their traditional role as the bread winner and keepers of family money. Indeed, many depend on the women in the family to provide for them.
    Women are outliving men, are generally more healthy and need to think about providing for themselves up to an after death. I urge those young enough to start now, to put away as much as you can, be frugal without being mean with your loved ones. Learn to say ‘NO’ more often and mean it to those who expect a helping hand because you have done it so often before.
    Just on that note of expectation and psychology: recently I spoke with and became familiar with a particular male charity volunteer (animal shelter) who regularly rang me (every 8 weeks) for donations to the shelter. I regularly gave amounts between $50 and $100. It was not something I really wanted to do every time and often thought when I ended the phone call from the volunteer of how he had persuaded me again to part me from my money. I was often mad with myself, and often rationalised that MY money would have been better in my daughter’s purse (single Mum) than in the charities bank. Anyway, on the next call from this man, he explained how the psychology of persuading people to give money was utilised (he had studied psychology and had a previous career in financial marketing). The technique was short and simple as was my next contact with him – goodbye to Sol! The savings from this charity is put aside for special events for my family and me! As for other regular and frequent callers for donations or raffle tickets, the same applies most often. The other increasingly alarming concern I have is scamming, so unsolicited contact from organisations I don’t know is ended. Charity for now, begins and stays at home!

    • fredjohnson says:

      @lifeisdynamic—-what I do for charity is pick one or two charities that I like and I only give to them. I say “no” to everyone else. Period. My charities happen to be christian ministries that I know and support and I give about 10% of my income to them each year. Have been giving to the same charities for 20 years. Works for me because I trust them and know them.

  • lana says:

    I think it is not only the amount of money coming into a family, but how wisely it is used. I haven’t worked for over 20 years, but have contributed to our family’s bottom line quite significantly.

    While raising our children, I taught them how to read and write, math, history and on and on. Both have received scholarships. I budget, invest and plan how to spend our money.

    Most recently, I have found that buying our meds from Canada has saved us $1400 a year. We use a zero balance budget, think about cost per use.

    Women may earn more or less, doesn’t matter. What matters is how much a household keeps from squandering.

  • zimmy@moneyandpotatoes.com says:

    Yeah, if you are a woman and think that you know nothing about money, you probably know more than you think you do. Do you pay bills? Do you buy groceries? Do you comparison shop? If you learned how to do some things financially, you can certainly learn to do others.

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