Women handle finances differently and face unique challenges. Here's how to come out on top. By Janet Bodnar, Editor-at-Large December 7, 2006 When it comes to money, women really are different from men. What sets them apart is the different situations they will face during their lives, each with financial implications. For example, women have longer life spans and more checkered work careers than men, moving in and out of the paid labor force more frequently. When they marry, they often face a special kind of financial dependency that is not always unwelcome but can work to their disadvantage and may be discomfiting. They often bear the main responsibility for rearing children, and then take on the added financial burden of caring for aging family members. Finally, after years of having their financial lives intertwined with the lives of others, they face the prospect of years on their own following the death of a spouse and the launching of children. In my new book, Money Smart Women, I cut to the chase, giving busy women specific financial advice tailored to each stage of life: how to establish financial independence when first starting out, how to maintain that financial independence in marriage, how to survive a divorce and how to invest with confidence to ensure a secure retirement. 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. Advertisement How the sexes stack up Because their life situations differ from those of men, women often look at the same financial products from a different perspective. Nowhere is this Mars-versus-Venus divide more apparent than when it comes to investing in the stock market. In fact, over the last decade few areas of personal finance have been dissected as thoroughly, and the results tend to be remarkably consistent: Far more women than men express a lack of confidence in their ability to invest. As a result, many women either don't invest at all or invest too conservatively. In a recent study by OppenheimerFunds, for instance, more than 60% of the women interviewed said they don't know how a mutual fund works, versus 41% of men. Within a household, women are more likely than men to pay the bills (60%), balance the checkbook (67%), and maintain the family budget (54%). But only 25% of women -- versus 44% of men -- are responsible for buying and selling stocks, bonds and mutual funds. Another survey by Merrill Lynch found that women don't enjoy investing as much as men and aren't as likely to try to beat the market. When brokerage firm Charles Schwab looked at the portfolios of its clients, it found that women were more likely than men to have money in bank certificates of deposit. One reason may be that women tend to be "present thinkers," providing for their families' immediate needs and wants, saving for short-term goals and balancing all the elements of day-to-day life -- in short, multitasking. Advertisement But personal experience also plays a big part. Women still earn less than men, on average, and work more intermittently. By age 45, full-time working women average 3.2 fewer years of work experience than men, according to the Employment Policy Foundation, so they build up less in retirement savings and seniority. Women who marry are often financially dependent on their husbands to some degree. That's a risky business when you consider that about 40% of first marriages will end in divorce, and the average age of widowhood among women in first marriages is 58. Even though they are more educated, more involved in financial decisions, and control more wealth than ever before, a startling 90% of women interviewed in a study by the life insurer Allianz said they feel somewhat or not at all financially secure. As a result, they're reluctant to risk their resources. One of the most striking analyses I've read involves the so-called "bag lady syndrome," as perceived differently by men and women. When a man sees a homeless person, for instance, he's more likely to take a detached, third-person view: "I wonder what happened in that person's life to bring him/her to this." By contrast, a woman looks at the homeless person from a first-person perspective: "That could be me someday." Advertisement One reason for the dramatically different reactions is that men are far more likely than women to feel they have control over their financial lives. While women want to preserve their assets, men figure that if they lose money they can always make it back. A socko team But lack of confidence doesn't mean lack of competence. When it comes to investing, women can actually be more capable than men. In a study of investors at a large discount-brokerage firm during the 1990s, Brad M. Barber and Terrance Odean of the University of California at Davis found that women investors outperformed their male counterparts. What's their secret? Women are more likely to do research before they make an investment decision, rather than to gamble on a highflier. Once they decide on a stock, they're more likely to stick with it. They trade less often, Barber and Odean found, and the less often you trade the better your returns because you save money on commissions. Advertisement Barber and Odean found that men actually traded 45% more often than women -- a result they attributed to overconfidence. The Merrill Lynch study found that men are also more prone than women to making other investment "mistakes," such as holding a losing stock too long or waiting too long to sell a winner. What all this suggests is that working together, men and women make a socko investment team. They complement each other, enhancing strengths and compensating for weaknesses. In other words, you can keep him from taking a flier on silver futures, and he can drag you out of bank CDs. And the two of you will stand a much better chance of amassing the assets you need to enjoy a secure retirement -- together. Janet Bodnar is deputy editor of Kiplinger's Personal Finance magazine and the author of Money Smart Women, available at retail or online bookstores including Amazon.com or Barnesandnoble.com.