Women & Wealth

Financial Planning

May 9

A recent study1 by Mckinsey & Company found that women currently control more than $10 trillion of wealth. That number is expected to increase to nearly $30 trillion by the end of the decade as boomers age and assets change hands. That’s a staggering amount of wealth. Even where wealth is held jointly by couples, women are beginning to take control.

The same Mckinsey study found a 30% increase in married women making household financial decisions over the past five years. Whether married or single and at every stage of life, women are carving out independent financial futures and making meaningful decisions to safeguard and grow their family wealth.

Women Aren’t Just Inheriting Wealth

Women are creating their financial independence in record numbers. Whether they work for a company or start their own business, women are well on the road to achieving wealth from their efforts. Forty-four percent of women with a private net worth of more than $100,000 are self-made.2 Since 2007, the number of businesses owned by women has grown by 58%.3 And when they work for someone else, women are beginning to have a clear idea of what they are worth and are willing to ask for it. Of the more than one-third of women who say they've asked for a raise, 74% were successful.4

And They Feel Differently About Their Money

Women are primarily concerned about creating financial independence and maintaining it for their entire lives. The biggest motivating factor for women in creating wealth is financial security. While 59% of men identify financial security as their motivation, 72% of women do. This impacts all aspects of managing their money.5

Leaving a legacy isn't the main concern
Social status through wealth isn’t as prevalent
Early retirement doesn’t come up as often
Spending wealth on “toys” isn’t really a thing

The same study cited in the stats above also found that generationally, women think similarly. Both Gen X and Boomer women cited “family security” as the primary reason for gaining wealth.

The Path to Financial Independence

Women have some advantages when it comes to investing and financial planning. They generally don’t trade as much as men do, so they have lower fees, and they aren't as likely to engage in panic-selling during downturns. However, they also don't take advantage of investing as much as they should- women tend to hold too much in cash. They also have some specific challenges that require a financial plan tailored to their needs.

Longer lifespans mean retirement funds need to last longer – so saving sooner, saving more, and investing with more risk during working years are all key
Healthcare costs more. Having kids and living longer is expensive. Setting up a Health Savings Account early on and consistently saving provides tax benefits and a source of healthcare funds in retirement
Women have more education debt. They graduate from college at higher rates than men, but a consequence is that two-thirds of education debt in the U.S. is owed by women.6

Cash flow planning that links budgeting to short-and-long-term goals should be a priority.

Getting Started

The best way to get started on a financial independence plan, no matter what stage you are at, is to get educated. Working with a fee-only financial advisor that focuses not just on the “what” but the “why” is a good place to start. Financial advice isn’t what it used to be. You aren't stuck with either a glorified salesman (almost universally "man") who works for a big firm or a robo-advisor that offers little to no planning. Fee-only fiduciary advisors have many different options for working with clients. Some options:

Customized educational courses so you can ask questions and get answers to concerning questions. Zoom meeting allow you have a hands on aproach to finanaical planning. some are often in a group format, which creates a built-in community to help you keep going.
Having monthly planning session for a flat fee in which they get you set up and sorted out, and you can take it from there.
Depending on your situation, comprehensive ongoing financial advice may be right for you. This takes the onus off you, creates a long-term partnership that grows with you as your life evolves, and can bring you a team of people that will help you meet your goals.
The Bottom Line

Women are creating and controlling vast amounts of wealth. As they make choices and move towards financial independence, having an awareness of the particular needs and challenges of the female financial journey is critical. Working with an advisor that focuses you and your on-going education lays a solid groundwork for success.

References:

1. Mckinsey & Company

2. Forbes. Women Hold Nearly One-Third of Global Private Wealth.

3. Women’s Business Enterprise Council

4. Marketplace. Men and Women Ask For Pay Raises at the Same Rate.

5. U.S. Bank Wealth Management Report

6. American Association of University Women

The information contained herein is intended to be used for educational purposes only and is not exhaustive. Diversification and/or any strategy that may be discussed does not guarantee against investment losses but are intended to help manage risk and return. If applicable, historical discussions and/or opinions are not predictive of future events. The content is presented in good faith and has been drawn from sources believed to be reliable. The content is not intended to be legal, tax or financial advice. Please consult a legal, tax or financial professional for information specific to your individual situation.