Outside the Box: How to plan for the unique financial challenges women face

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As we celebrate another Women’s History Month, I’ve been reflecting on the role of women in the financial ecosystem.

Women make up half the population but for so long have been treated like a niche demographic in financial services. Today, women are largely responsible for their families’ financial decision-making, and we hold the majority of consumer spending power. Certainly, we are anything but a niche.

Let’s take a look at the numbers. Women are a true financial force, controlling over half of personal wealth in the United States, to the tune of $14 trillion. By 2030, we’re estimated to control two-thirds of it, thanks in large part to the coming wave of intergenerational wealth transfer from Baby Boomers to succeeding generations. That’s a lot of assets in female hands.

I’ve heard many times that investing in women is a great way to invest in whole communities. Globally, working women put significantly more of their earnings into their families than men do,3 and women are responsible for 70%-80% of all consumer spending, which means we’re putting a lot of money back into the economy.

With all of this economic power, you might expect women to feel they are on top of their financial lives. Unfortunately, that’s not the current case.

Research shows that women are much more likely than men to experience financial anxiety (57% vs. 47%) and to feel stressed when discussing their finances (49% vs. 38%). Moreover, just 12% of women are “very confident” they’ll be able to retire comfortably.

These numbers might seem disheartening, but we can turn the tide through education, goal-setting 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, women provide a disproportionate amount of caregiving in the U.S., and much of this labor is not only unpaid but may also lead to a reduction in income. For instance, we may put our careers on hold or reduce our 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 live about five years longer than men, meaning many of us outlive our male partners. Because of the career interruptions I just 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.

Setting and meeting goals

When I talk to women about their money, I encourage them to think of it as a vehicle for realizing their personal vision of success. Through thoughtful planning, you can garner the financial freedom to pursue your dreams, bring stability to your life and the lives of your loved ones, handle the inevitable obstacles life throws in your path, and contribute to the causes close to your heart.

That all sounds great, but how do you get started? There are a few basic steps for developing a money management strategy.

First, 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. 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 grandchildren.

With your goals articulated, a sound next step is to come up with a saving and investment strategy, keeping in mind that it may very well change over time. A great place to start is with your workplace retirement plan, which may offer access to professional advice. If you have other financial wellness resources available to you at work — such as financial planning or coaching, or educational programming — enthusiastically take advantage of them.

Get your family involved in this planning as well. With your partner, be honest about 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. 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 and starting to save and invest early.

Preparing for the expected and the unexpected

For all of our careful planning, life is bound to throw us curveballs. 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. In the short term, work towards building an emergency fund in a liquid account, which could cover three to six months of essential living expenses if you find yourself short on income.

Depending on your age, estate planning may or may not be top-of-mind, but one of the best ways you can care for your family is to get your financial affairs in order. Proper estate planning can help you manage estate taxation, 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 wealth management strategy.

The bottom line

It’s natural to feel overwhelmed by all the life events we need to prepare for. But women are tough, and we’re smart, and we’re planners.

Feeling in control of your finances can propel you in so many other areas of your life, so 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.

Krystal Barker Buissereth, CFA, is executive director and head of financial wellness, Morgan Stanley at Work.

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