Are you financially fit? Are your friends? Do you even know what it would mean to be financially fit? When Prudential and my friends at SheSpeaks asked me to write a post about this topic, I had to ask myself these hard questions. I realized I can cut coupons and look for deals with the best of them but there was still A LOT I didn’t know.
Prudential has been researching the financial challenges women face for several years. Their Financial Experience study has tracked women’s outlook towards financial planning. The results were very similar to how I feel.
Why It’s Hard for Women to be Financially Fit
1. We don’t know enough about financial security.
Generally speaking, women take care of so many financial things in our families’ lives, yet we often don’t know enough about financial security. The research found that the most important goal for women is having enough money to maintain their lifestyle through retirement. As a mom who doesn’t work outside the home, being financially fit in retirement is definitely something that I want. Will I have enough to retire and still live my same life style? Will my kids and I be OK if something (God forbid) happens to my husband, our main source of financial support? I don’t have enough information on this topic to even know how to become financially fit.
2. We don’t like all the financial services jargon.
The “legalese” I find in financial forms makes me want to scream. The truth is that my strength is not in math unfortunately, and when I see all the fine print my eyes just blur over. I have to think about car pool and the special snack schedule and if Garden Club is meeting this week. It is tough to focus on all the intricacies of financial planning, however that’s just what I need to do to become financially fit.
3. We feel time-starved and cash-strapped.
Umm…YES! The Prudential study found that many women take care of day-to-day budgeting and are responsible for how much of the household’s money is spent. However, we leave out some of the important pieces of long-term financial planning such as insurance and saving for retirement. Prudential characterizes this behavior as “lower engagement” and I definitely fall into that category. Just doing life takes up so much of my brain space that anything “extra” just doesn’t get done. But, that’s got to change!
Check out what my friends Audrey and Vera have to say about women and finances. I’m right there with them!
When it comes to taking charge of our finances, due to some very real reasons, statistics show women are still falling behind.
- On average women have 30% lower retirement balances than men
- 44% of women have no life insurance. Even among the ones that do own life insurance, most are underinsured2
- Women retire with 67% of the wealth of men, yet they live 5-6 years longer than men 3
Four Insights Women Must Confront to Become Financially Fit
1. Wage and Income Gap.
The average woman working full-time earns 79% of the income earned by her male counterpart.4 This is because of many issues including the lower likelihood to negotiate salaries, time out of the workforce, and differences in pay. The wage gap impacts women’s 401K balances over their lifetime as well as their social security payments. Predictably women’s social security benefits are 27% lower than that of their male counterparts. 5
2. Investment Gap.
Women don’t invest to the same degree as men.6 Women’s discomfort with investing comes at a high cost for them. They are apt to delay investing, invest more in lower risk, lower return investments and are more likely to run out of money in retirement.
3. Life Expectancy Gap.
Women outlive men by an average of five to six years. 3 Are we prepared financially for those years? I certainly don’t want to think about that, but I need to! All of us moms need to!
4. Time Gap.
On average, women in the U.S. spend 28 hours per week on household chores. That’s 65 percent more than the average for men.7 I know I spend at least as much as that! From car pool to homework duty to the never-ending pile of laundry, there’s so much to do. And of course, all this work is uncompensated! It does not figure into my financial planning.
Prudential has created a tool,called the value of all you do, that lets us very quickly quantify the value of all the household chores we do on a daily basis. What you would need to pay someone to do those for you. The tool found that it would cost my family nearly $80,000 per year to pay people to do all the things I do for my family. This means I need over $1.5 million in life insurance. I had no idea!
Like Vera and Audrey, I’m working on making 2017 the year I start focusing on how to become financially fit. The first step for me is becoming aware. Aware of my own limitations and lack of engagement. I need to learn more about my financial picture. And then work to improve it.
Will you do a virtual pinky swear and commit to becoming financially fit too?
- Source: Prudential Retirement analysis reflecting defined contribution plan balances of Prudential record-kept plans as of December 31, 2015
- Source: LIMRA study, Life Insurance Ownership in Focus, U.S. Person-Level Trends: 2016
- Source: Prudential Retirement analysis; National Center for Health Statistics, Health, United States, 2015: With Special Feature on Racial and Ethnic Health Disparities. Hyattsville, MD. 2016
- Source: U.S. Census Bureau, Historical Income Tables Table P-40: Women’s Earnings as a Percentage of Men’s Earnings by Race and Hispanic Origin, 2016
- Source: Social Security Administration, Fast Facts and Figures About Social Security, 2016
- Source: http://fortune.com/2016/05/11/sallie-krawcheck-ellevest-launch;
- Source: Organisation for Economic Cooperation and Development, October 2016, http://stats.oecd.org/index.aspx?queryid=54757