Women investors face challenges

As I am reminded on a regular basis, women are smarter than men.  And they live longer.  So why do we keep reading – in study after study – that women are less financially successful than men?

Well, it might have something to do with the fact that:

• Women earn less money than men, on average. The gap has narrowed in recent years, but the less you earn, the harder it is to build wealth.
• Longer life expectancies mean women must save much more than men. The unpleasant alternative is having less to spend in retirement.
• Many women pause their careers to have children, which can set their savings plans even farther behind.
• And because they live longer, they are much more likely than men to become caregivers to their parents or other relatives.

Some of the challenges that women investors face, however, may be self-inflicted:

• Women save a smaller percentage of their income than men, on average.
• Women are far less likely (51%) than men (74%) to own stocks, according to a recent national survey. By historical standards, that means lower investment returns.

At our firm, we work with men and women, young and old, married and single, working and retired.  Our women clients are entrepreneurs, homemakers, business owners, nurses, professionals, authors, educators, scientists, artists, administrators, corporate executives, missionaries, widows, single moms, divorcees.  You get the point – they are a diverse group.

But my advice to them – along with every other woman reading this – is universal:

1. Recognize your unique financial challenges, and accept complete responsibility in overcoming them.
2. Recognize your unique advantages, and use them. Women generally seem to be more rational thinkers than men, for example (again, so I am told), so put your superior brain to use.
3. Start saving and investing earlier. Time is the investor’s most powerful ally.  The dollar you invest today will likely mean several times more to you when you retire than the dollar you invest 5 or 10 years from now.
4. Save more. The amount of money you are able to save and invest is much more important than the investment return on that money.  Compounding 8% of your income at 1% a year for 30 years, for example, is more than twice as effective as compounding 1% of your income at 8% a year for the same amount of time. 
5. Have accounts in your own name. Open your own traditional or Roth IRA.  Build your own credit record.  Coordinating finances with your spouse is generally a good idea, but not if all of your household assets are in one name.
6. Manage your career. Take advantage of any opportunity to learn new skills.  Volunteer for work others refuse to do, and make yourself indispensable.  Ask for more responsibility.  And then ask for a raise.
7. Learn about investing. Owning stocks is a lot less scary once you master a few basics.  Take a class; read a book.  Attend meetings with your financial advisor together with your spouse.

And if something comes up in those meetings that doesn’t make complete sense, ask questions.  You’re better than men in that regard, too.

Or so I am told.