Projections indicate that women will inherit 70 percent of future wealth over the course of the next two generations.
This staggering figure does not include the wealth that women will earn themselves. That means women, who already control more than half of all investable wealth, are expected to take on even more financial power in the coming years.
This reality is why we launched Her Wealth® and why we educate women about managing their money. Despite the name of our initiative, we want to set the record straight: Our efforts do not exclude men. They more fully include women.
Her wealth is your wealth
We want and need men to participate in this process by encouraging their wives, mothers and daughters to become more engaged in their finances. That will secure the long-term financial health of the entire family, including the financial security of men in old age.
As women make and inherit more money, many are taking greater interest in managing the family finances. Also, 75 percent of women will be single by the time they are 75 years old, and most women will solely manage their finances at some point in their lifetime. The fact is, women need to become more prepared to manage their finances. If they don’t, they could be forced into taking control while in a crisis, which is the worst kind of “on-the-job training.”
It’s a common misconception that many women simply aren’t interested in taking an active role in money management. Our observation is that women want to be more involved, and will begin to engage when given the right opportunity.
Boosting women’s confidence is key
A lack of engagement in money matters is not necessarily due to a lack of interest, but rather may be about discomfort around the topic itself. A Fidelity Money Fit Women study found women are more comfortable talking to their partners about health or work issues than about money, with 65 percent of surveyed women saying they are less likely to discuss investment ideas. But women also said more support from their spouses would encourage them to become more engaged in their finances.
The study also found that 92 percent of women said they want to learn more about financial planning and that 83 percent want to get more involved in their finances within the next year. Boosting confidence and encouraging participation are areas where men can help the most, as less than half of the women surveyed said they’d be comfortable talking about money on their own with a financial professional.
Collaboration creates both harmony and better financial results
Marriage counselors and relationship therapists say the best relationships are ones where partners regularly talk about money. Even without statistical proof, we all probably know of at least one couple whose marriage failed as a result of money issues. It’s normal to disagree about money, but having worked with hundreds of couples over the years, I have found that when a couple learns to positively discuss their money, their overall relationship improves.
Discussing money also makes it easier to work together toward common financial goals by uncovering areas of disagreement and setting expectations of what each person needs to do to contribute to meeting those goals.
What may not be fully appreciated is that women and men often have different financial skills. LIMRA’s Secure Retirement Institute study suggests that men focus more on the revenue side of retirement planning, while women focus more on expenses. These different but complementary skill sets make for a good reason for the two to team up.
Putting your strengths together may result in a better approach than simply having one partner manage all of the family money. We recommend that men consider their own money strengths, play to their partners’ strengths and make managing finances a joint responsibility.
Mutual engagement contributes to family security
Sometimes couples waste time and energy butting heads about money. We suggest refocusing that energy by taking positive actions toward creating a financial plan. For example, if you and your spouse work together on your financial future, then you’re more likely to have put in place the necessary insurance, like disability insurance and an estate plan, like having wills and trusts. Spelling out what should happen in case of unexpected events means you’ll both be equally prepared if someone has to take on the task of managing the finances on their own.
This positive behavior will go a long way in securing your children’s financial futures, too. When both parents are on top of their financial situation and equally engaged, it’s less likely that the younger generation will be caught off guard or have to step in should one parent become disabled or die.
Treat your daughters like your sons
Fathers can also protect your children’s financial future by setting the same expectations for their sons and daughters when it comes to money. Parents can help their children create more life choices by instilling financial independence, no matter their gender.
If you have daughters, consider that millennials marry much later in life, if at all. One study showed that women born in the 1980s and 1990s are on track to stay unmarried at rates much higher than previous generations. In fact, the marriage rate for women currently in their early 30s is close to zero.
Because young women are likely to remain single well into their 30s, they will need to effectively manage money alone far longer than their own mothers. When you also consider that many carry college debt in the tens of thousands of dollars, they enter their earning years less financially secure than any generation before them.
Fathers can have an immeasurable positive effect on the financial futures of their daughters. If fathers (or other male role models) encourage their daughters to take responsibility for their own finances, they will be more likely to have financial security throughout their lives, more likely to be prepared for their own retirement, less likely to live in poverty in old age, and less likely to stay in unhealthy relationships.
Replace ‘money fears’ with financial facts
In our article “How to Overcome Your Money Fears and Move Ahead,” we identified fear as a common emotion women experience when dealing with money. It’s natural for women to have some level of fear about financial security, especially as they tend to live longer. Fear can paralyze both men and women by getting in the way of important decision making. It can also be a powerful factor that motivates women to become more financially engaged and prepared for their future.
A thorough review of your finances as a couple can replace many of your fears with facts. Without a detailed review of numbers, women too often assume their situation is worse than it really is. By working through the details, they gain clarity and have a more realistic understanding of the actions they need to take to create a solid financial future. This is where engaging women in the process can go a long way in improving a relationship around money and create a positive experience when managing collective hard-earned wealth.
Here are a few tips to help you engage the women in your life in their finances:
- Start with an overview: Many women are just not as involved in a couple’s investment decisions, but these decisions are a primary driver of accumulating wealth. If that’s the case, consider starting with a regular review of your accounts and statements. Talk about what you are invested in and why, including the returns and expenses. Even if you are handling the tasks of managing the money, that doesn’t mean you should make the investment decisions alone.
- Increase visibility of details: It can be helpful to have trade confirmations and all other correspondence about your accounts sent to both email addresses so that she will be notified and more aware to changes in your accounts. This simple step opens the door to questions with the information being more informative when put in the context of real actions in your accounts.
- Establish a regular schedule: Life happens and finances change over time. Having ongoing conversations is critical to maintaining financial success as a couple. When couples fail to check in regularly regarding their money, they can lose track of their mutual longer-term goals. Lack of communication may also open the possibility of one partner establishing a concealed financial account or spending outside of agreed-to limits.
- Encourage ongoing education: Whether you steer them to the Her Wealth website or recommend one of the many books on personal finance, financial literacy is the foundation of establishing good lifelong financial habits.
- Show appreciation: Make positive comments when she takes steps to empower herself financially. Particularly in more traditional families, women become more motivated toward positive financial actions when encouragement is offered.
We’d like men to consider that if you’re not talking to your spouse about your finances, both of you are making individual money decisions that affect your entire family every day. Absent discussion, you’ll each act according to your own desires, which may not fit with the expectations you have for your future.
So talk about money with the women in your life in a way that encourages and empowers them to want to participate more. You have a stake in Her Wealth — the financial security of the women you love.
Dawn Doebler is a senior wealth adviser at Bridgewater Wealth and co-founder of Her Wealth®.
