The Rise of Women and Wealth
What do you think of when you hear “Women & Wealth?” Do you think of the women in your life who are successful? Those who are not? Either way, are you aware wealth is shifting to women faster than ever before? The reality is that women need to be prepared to receive more wealth in the near future. And in turn, this requires some preparation.
When women don’t have wealth, we tell ourselves that more money will solve all our problems. Then the money flows, and our worries change. We second guess all that advice we gave when we didn’t have money, and feel judged by those close to us. Big money means the potential for big mistakes, so we freeze. Planning for the future seems monumental after spending so many years getting by paycheck to paycheck.
All of a sudden, you need to make decisions on allocating your resources. Even though this is what you wanted all along, instead of confidence, you feel panic, guilt, or even fear.
Managing the Next Decade of Women’s Wealth
Wealth is headed our way. Women control one-third of the world’s money right now, and women’s wealth is outpacing the growth of global wealth overall. This is good news!
As recently as the 1960s, women in the United States couldn’t get a mortgage without a man to sign. We already know that women receive lower pay than their male counterparts with similar education and experience. Working mothers and people of color trail the farthest behind. Despite these setbacks, persistent women are building wealth steadily, both through strides in the workplace and smart investing.
In 2019, a McKinsey study found that women’s presence in upper management roles had increased 20% since similar data was collected in 2015. Women have been well-represented on college campuses for years, so it’s high time they were represented in the work world at all levels of management. Millennial women are closing the gap and earning a greater share of their wealth as compared with previous generations. They also enjoy greater flexibility and earning potential as compared to the generations before them.
There’s no rush to return to a low-paying job!
Even though women were more likely to leave the workforce during Covid, they are not rushing back to low-paying jobs. The mass exodus of women because of childcare duties and lack of flexibility was eye opening and has contributed to many companies’ decisions to offer more remote and flexible working arrangements. Many women have taken the past year to reflect on what work/life balance means for them.
The impact of so many women leaving the workforce caused America to take notice. Women are no longer willing to put their work ahead of their own health or the health of their families.
The Me Too movement brought additional attention to women’s experience and voice in the workplace. Aside from wanting a workplace that is free from harassment and sensitive to family responsibilities, women want to be recognized for their often downplayed accomplishments.
The times are changing
In Tokyo, women are bringing attention to the unfairness of expecting a breastfeeding mother to choose between their baby’s health and a possible Olympic medal. Many of the women’s teams are questioning why a bikini is required for competition.
As the workplace became more remote and freelancer-friendly, many women have chosen to pivot towards entrepreneurship and self-employment with their sights on financial solvency. Employers are questioning the benefits of a traditional 9-5 office workforce, especially as they realize there are cost benefits to smaller offices.
Oh, yeah. And women also stand to inherit a large portion of the $30 trillion that baby boomers will be leaving behind. As primary care-takers of aging parents, women are top of mind as parents look for a steward for their own legacy. And most of that money is ultimately left by women, as their life expectancy is the longest.
So we have to be prepared. Wealth is coming, and being ready to accept the money and all the feelings that come along with it will prevent costly mistakes.
Are Women Undeserving of Wealth? I Don’t Think So…
One of the biggest myths women believe is that they do not have what it takes to protect and grow wealth. This is probably because for so many years, society has been skeptical of our ability to do so. It’s a lie.
Women don’t necessarily talk about their trepidation with money. In fact, it’s obvious in the way we avoid talking about money. But wanting and making money is not a dirty thing, and how do you learn about it if it’s a taboo subject?
In a study on financial knowledge, women leaned heavily on “I don’t know” as an answer when they were faced with questions about how to handle different financial scenarios. When that answer was not available, they chose the correct answer. The study concluded that one-third of the supposed “financial literacy gap” between men and women could be attributed to lack of confidence.
A woman’s need for confidence
Women want to be sure before they make a move. Being cautious with your money has its benefits, but hesitancy also prevents many women from participating in the stock market or even their own financial planning because they have a low comfort level with the information. Men do not know more, they just feel more confident, and therefore, participate. And this attitude has paid off for them.
When women come into money, their first reaction is often that it was a fluke, not because they deserve it. They are not emotionally ready to accept and own it. They turn to someone else to help them make decisions, even if that person is not necessarily more knowledgeable and may not have their best interests at heart.
When we are in debt we prefer to hide that fact. Debt takes away your power, but there’s a certain comfort in weakness if it’s all you’ve known. You don’t have to make big decisions. You just pay what you can. No one is taking advantage of you for your money.
When women do come into money, their first thought is often who they will give it away to. Women fear judgement that they are selfish or too showy or will be exploited. They don’t want to upstage a man’s ego if they out-earn him.
Women and Wealth: Putting Others First
Women have a tendency to put others’ needs above their own. This can be tied to feeling unworthy, but also reflects on the way women take care of others. Like being overly cautious, putting others first may seem like the noble thing to do. While charitable giving is an important part of a financial plan, and you want to help those you love, keep in mind that having money is power. You can do so much more good when you maintain wealth.
For one thing, if you give all your money away, you risk putting yourself in the position of needing help from others.
I see this when parents take out huge loans to send a child to an expensive private college. They don’t want their kid to have crippling loan debt, so they take it on instead of prioritizing retirement saving. In the end, the kid majors in art and mom and dad now need support in their golden years because they didn’t save enough.
Are you a good steward of money?
Had they been better stewards of their own money, they would be in a position to support themselves and help out their children later. We want the best for our children, but sometimes a strong example of what good money management looks like is the biggest gift you can give.
Aside from not wanting to become a burden on others, why would you assume that someone else is a better steward of your wealth? You earned that money, and you deserve to have a voice regarding those dollars.
Money not only allows you to care for other people, but you can also use it to influence the outcome of causes you care about. From a strong financial position, you can make real change happen. Your investment in environmental concerns, social issues, government, or whatever you feel strongly about, can make a real impact. It brings leverage to the discussion.
Women and Wealth: Are Women Vulnerable to Scams?
Of course, we talked about how women worry about being taken advantage of if they handle their own finances, but by giving the reins to someone else, the reality is that they are often conned.
Given women’s tendency to question their own judgement and want to help others where they can, it should come as no surprise that as a group, women with money are susceptible to scammers. This could be a professional con artist or your nephew who wants you to fund his business. I’m not saying your nephew is necessarily trying to take advantage of you, but when we have money, we can suddenly feel obligated to do things and become entwined financially with things we normally would not.
When it’s time to switch the roles…
Just because you can, doesn’t mean you should. Switch the roles and see if the ask is something you would expect another person to do. For example, if your brother is pressuring you to help him buy a car because you now have the money, is this something you would have asked him for if the roles were reversed? Anytime you let money become a part of family and friend relationships, there should be red flags. If it’s a relationship you care about, consider gifting the money. If you are not able to consider it a gift, don’t offer it up at all. When things go south, you will likely lose both the money and the friendship.
I don’t want you to be afraid of having money, or to feel overwhelmed by the potential moral dilemma’s headed your way. But I do want you to think about what it will be like when you have money—the good and the bad—and have a plan before you are faced with these decisions.
Suze Orman talks about how people are attracted to power. And people who control money are powerful. Debt is the opposite. It makes you feel less-than and people sense this. Your goal is always to eliminate high-interest debt. You will gain confidence and be a different person when you don’t owe money you don’t have.
Reaching this goal is a big deal! You switch personas from being indebted to having the power to invest and even loan money. How do you harness the power that comes with wealth?
Be Your Own Financial Advisor
Remember how I said many women don’t trust their intuition, even when they know the fiscally responsible thing to do? If this sounds like you, it’s time to grow your confidence! If you aren’t sure about how to handle money, read up on personal finance. Ask questions, dig into the details until you have a base-level of comfort with the subject. It’s easy to find books about money management for free at your local library.
Think about who you will trust when you have money, and build that team now. You may have an advisor you trust, or have access to a family member who knows about finance and has had success with their own money. Start a conversation about what savings you need. Where will you invest money, and how will it best grow tax-protected. Consider what investments interest you and how you can automatically save each month.
You don’t have to have money to learn about the stock market and the way people successfully manage money. In fact, the idea is to have a plan before the money comes. And once you have an idea of how much you need in an emergency fund, and decide to open an IRA, you can start slow. The way to grow money is to just start.
Creating a budget you can stick to is one of the best ways to make room for saving. And start paying down debt. These are the first steps inviting wealth into your life.
Put the People in Place to Help You Emotionally Prepare
Even if you have a solid grasp on personal finance and know exactly what you should do, sometimes emotional hurdles, like money shame, will hold you back from doing it. Money shame will tell you that you don’t deserve to hold onto money, or that you are destined to fail in the same ways that you have in the past with spending. You may even struggle with other obstacles like addiction or emotional co-dependency. Sometimes you need the support of a therapist or coach to get your mind in the right place to execute a practical financial plan.
Even though women are the fastest growing sector of the economy, the financial advising industry caters largely to men. Women are underrepresented (only 15% of advisors) in the wealth-advising business and underserved by the planners they work with. A lot of time, marketing towards women misses the mark by assuming they are all one homogenous group.
Women and Wealth: In the pursuit of life goals
Compared to men, women do tend to be more focused on life-goals, not just money for the sake of more money. They are more likely to leave the workforce to care for children or parents. Women plan differently knowing they have a longer life-expectancy. They are more interested the impacts and social consciousness of the companies they invest in. Leaving a legacy or generational support is higher on their radars.
But of course, women have varied goals and meeting with a coach can help you pinpoint the things that are most important to you and prioritize saving for those goals while balancing the other parts of your budget.
Women tend to make decisions based on fact. One study found that women are not necessarily more risk-averse to men, but rather want to be more informed. In some ways, this improves their portfolios, as women are more likely to spread their risk and invest long-term. But they are also more likely to keep a higher percentage of their wealth in cash and deposits rather than investments. Bottom line: Women are superior investors. But they lack the confidence to go for it. They hang back.
Create a Plan. Now.
You don’t have to throw altruism and family out the window to prioritize growing wealth.
List the organizations and things you value and want to support more if (and when) you have the money. Be specific.
You should be high on that list. This is your wealth that you need to maintain! How do you picture your retirement years? What will it take to get there. Consider what legacy you want to leave, and then create a support team to help you achieve those goals.
If someone belittles your goals or tells you you want the wrong things, they are not a good fit for your team. You should be driving the discussion when it comes to your money.