Women and Money: Planning for your financial future
Morgan Stanley Wealth Management05/26/23
Summary: Armed with education and a plan, women can feel more confident about their financial goals and how they’ll achieve them.
Today, women are largely responsible for their families’ financial decision-making and hold the majority of consumer spending power; but there are also unique challenges that come with these responsibilities. For example, women provide a disproportionate amount of caregiving in the US,1 live about five years longer than men,2 and are often more prone to conservative financial approaches.3
But those unique situations can pave the way for financial empowerment. Let’s consider a few ways women can set financial goals and prepare for the unexpected.
Finding financial empowerment
Women control more than $10 trillion in U.S. household financial assets. By 2030, analysts expect that figure to triple, thanks in large part to the coming wave of intergenerational wealth transfer from Baby Boomers to succeeding generations.4 That’s a lot of assets in female hands.
With that kind of economic power, women should be on top of their financial lives. That’s not usually the case, especially in the wake of a pandemic and its accompanying economic fallout, which has disproportionately affected women.
In January 2023, there were still 217,000 fewer women ages 20 and older in the workforce than in February 2020. Fewer than one in five women are very confident that they’ll be able to fully retire with a comfortable lifestyle.5
These numbers are disheartening and illustrate the need for a focus on women by the financial services industry. On an individual level, we can start to turn the tide through education, goalsetting, and planning.
Planning for the challenges women face
It is true that women’s needs and obligations often differ from those of men, so we should be having candid conversations about money acknowledging that fact.
For one, caregiving labor is not only unpaid but may also lead to a reduction in income. For instance, they may put their careers on hold or reduce working hours to care for children and/or aging parents.
Spending less time in the workforce can have far-reaching financial effects, in some cases preventing participation in company-sponsored retirement plans, or preventing a smooth career trajectory and the pay increases that come with it.
On average, women outlive men by five years meaning many outlive their male partners. Because of the career interruptions mentioned, that means many women are living longer on less income.
Finally, women may not be taking full advantage of the investment opportunities at their disposal, or the potential for their assets to grow, as they are more likely to take a conservative approach to money.5
Setting and meeting goals
It helps to think about vehicle for realizing your personal vision of success. Through thoughtful planning, it may be possible for women to pursue financial freedom, bring stability to their lives and the lives of loved ones, handle the inevitable obstacles life throws, and contribute to the causes close to their hearts.
That all sounds great, but how do you get started? There are a few basic steps for developing a money management strategy.
- Define your goals: Some of the things you’ll want to consider are the personal and professional milestones you hope to achieve in the short and long term. During this process, you might ask yourself what being financially comfortable means to you. Even if it seems far away, you should begin to think about what an ideal retirement will look like, whether it’s traveling the world, or moving close to your children.
- Come up with a saving and investment strategy: Keeping in mind that it may very well change over time. One place to start is with any financial wellness resources available to you at work, such as financial planning, money coaching, or educational programming. Such benefits are on the rise, with the percentage of firms offering a financial well-being strategy for employees expected to quadruple over the next three years.6
- Consider working with a financial advisor: It’s a great way to get help create and implement a financial plan that takes your specific goals and circumstances into account at each stage of your financial journey.
- Get your family involved: Be honest about your financial values and fears. Level-set on goals and expectations for retirement. And be sure you have information about and access to one another’s financial documents and accounts, so you’re prepared if something should happen to one of you.
If you have kids, talk to them about money, too. Do you plan on paying for college? Grad school too? Would they have any financial responsibility? You might discuss values around money, what their definition of success looks like—understanding it may differ from yours—and how they may be able to use their resources to affect positive change. Also get them thinking about important concepts like credit, budgeting, saving, and investing early.
Preparing for the expected and unexpected
No matter how carefully you plan, life will throw you a curveball at some point. A change in employment, an accident or illness, or the loss of a loved one can take a major financial toll on top of the physical and emotional trauma of such an event.
In the short term, work toward building an emergency fund in a liquid account, which could cover at least three to six months’ worth of essential living expenses if you find yourself short on income. If you work in an industry that’s particularly vulnerable to economic downturns, you might consider aiming for even more savings. You can start small and build up this fund over time.
One of the best ways you can care for your family is to get your financial affairs in order. Proper estate planning, such as having a will and other important documents in place, can help you manage estate taxation, help ensure your assets will go to the intended beneficiaries and minimize family turmoil.
When it comes to healthcare, plan for the best but prepare for the worst-case scenario. You can do this by making sure your health insurance plan covers the essentials, considering life and disability insurance policies, getting important legal documents in place (including a healthcare proxy and medical directives), and factoring the long-term cost of healthcare into your overall strategy.
The bottom line
It’s natural to feel overwhelmed when preparing for life events. But taking control of your finances can propel you in many other areas of your life. You owe it to yourself to define your goals, start a dialogue with your loved ones, and create a game plan. The modern face of wealth is female, so walk confidently into your financial future.
- Source: https://transamericainstitute.org/docs/default-source/research/women-retirement-security-report.pdf
- Source: https://www.cdc.gov/nchs/products/databriefs/db328.htm.
- Source: https://www.fool.com/retirement/2023/03/25/women-tend-to-invest-more-conservatively-than-men/
- Source: https://www.mckinsey.com/industries/financial-services/our-insights/women-as-the-next-wave-of-growth-in-us-wealth-management
- Source: https://nwlc.org/wp-content/uploads/2023/02/Jan-Jobs-Day.pdf
- Source: https://www.businessgrouphealth.org/en/resources/what-employers-are-doing-to-support-financial-well-being
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