Investor Psychology

Women and Money

Women face different situations from men, and, therefore, need financial advice tailored to their needs.

A few years ago, when I suggested that Kiplinger's Personal Finance magazine do a story on women and money, the editor was reluctant. Money is gender-neutral, he argued. Any story we did on how to invest, how to plan for retirement, or where to get the best return on your cash would apply equally to men and women. Furthermore, if we suggested otherwise -- that women were somehow different -- wouldn't that point of view reflect the ultimate in male financial chauvinism?

Not necessarily, I replied. If we suggested that women needed spoon-feeding because they had trouble grasping such oh-so-masculine concepts as making money, we would certainly stand guilty of patronizing our readers. If instead we reflected reality -- that women need specific financial advice tailored to the financial decisions they must make -- then we would do our readers a service. Just as Kiplinger's would not recommend the same investment mix for a 20-something college graduate as for a 60-something retiree, we would not necessarily recommend the same type of retirement planning for a woman with a full-time job as for a stay-at-home mom.

The truth is, I said, that women really are different -- but not because they're financial neophytes who are unsophisticated about money and make bad decisions about how to spend and invest it (a stereotype sometimes promoted by self-help gurus who promise to save women from themselves and their own worst instincts). Financial matters can sometimes be overwhelming and confusing for both men and women -- as I'm well aware from the questions we get at Kiplinger's.

Straight talk. What sets women apart from men is the different situations they will face during their lives, each with financial implications. They have longer life spans and more checkered work careers, moving in and out of the paid labor force more frequently. When they marry, they often face a special kind of financial dependency that's not always unwelcome but can work to their disadvantage and may be unsettling. They often bear the main responsibility for rearing children with sound financial values, and they take on the added financial burden of caring for aging family members. Then, after years of having their finances intertwined with others', they face the prospect of years on their own.

In the end, my editor agreed to let me write the story for Kiplinger's, and that story has served as the blueprint for my book, Money Smart Women. In the Kiplinger tradition of presenting useful information in a readable style, it's my intention to cut right to the chase, giving busy women the answers they need to the questions that are on their mind:

  • How do they become financially independent when they're paying off student loans on a starting salary?

  • What, if any, is the best way to combine assets in a marriage-and to ensure a fresh start if the marriage ends?

  • What's the surest route to a secure retirement, free from the fear of becoming a burden to their children or, even worse, a bag lady?

Stages of life. Another challenge to writing a book about women and money is that prospective readers are at various stages of their lives: just starting out in their 20s; making and living out commitments to partners and children in their 20s, 30s and 40s; and possibly starting again in their 50s, 60s, or 70s because of widowhood or divorce. But life isn't static: Either by choice or by chance, at some point most women will go through most of these stages, and change can be costly. The unifying theme of my book is that wherever you are in life, if you are a wise woman you should also be money smart.

For women, being money smart is a state of mind in which you're confident of your ability to support yourself financially if necessary, and comfortable with handling money -- or seeking help if you need it. You can (and should) achieve this kind of financial independence regardless of your marital status. Even a stay-at-home mom can save for her own retirement, make sure that her children are adequately protected by life insurance, and be an equal partner in her family's financial planning.

Far from causing tension, your abilities should enhance your relationship with your husband, partner or significant other because each of you has your own strengths and skills that complement the other's. When you're financially independent, you can approach life's twists and turns with assurance, secure in the knowledge that you can handle any curves.

An acquaintance of mine spent years working from home as a freelance writer while her children were young. When her husband was laid off from his job, she returned to work full time to get health insurance coverage for her family and retirement benefits for herself. Soon after, her husband found a new position and she was overjoyed -- but she had no plans to give up her job. "I like being captain of my ship," she told me. Whatever your circumstances, you can be captain-or co-captain of your own ship.

Adapted from Kiplinger's Money Smart Women (Kaplan, $15.95), by Janet Bodnar, deputy editor of Kiplinger's Personal Finance magazine. Available at a 40% discount through the Kiplinger store.

"Other books, like Kiplinger's Money Smart Women by Janet Bodnar, avoid the patronizing finger wagging and stick to giving advice that women can really use -- like explaining when you can tap your Roth IRA to help with a down payment on your first house. You'll save so much money, you may decide to treat yourself to a latte. After all, you've earned it." -- Time magazine, April 16, 2007

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