Women and Investing
Women often lack the confidence in their ability to manage their own finances. They hear unfamiliar words like “large cap value” and tune out. Or they claim they were never any good at math, or just aren’t interested in financial matters. It is true that women have a lot to juggle with careers and family and that there seems to be no time to devote to personal finance. Even though there are many educational resources available, many women do not avail themselves of those resources.
Young and single wage earners are often debt-ridden and put off saving and investing for the future, thinking they have plenty of time to deal with it. Or they sign up for the 401K at the office and don’t bother looking at what the money is really invested in. Married women may allow their husbands by default to make all the financial decisions when it comes to investing, planning, and saving for future needs. What happens when there is a divorce, or the husband dies? All women should learn how to manage their money and resources wisely.
One problem is that banks and financial companies have historically catered to men as the primary decision maker. Watch the ads on the business channels sometime, and count how many male investors are portrayed vs. females. Most investment firms and banks bear male names (JP Morgan, Charles Schwab, etc.), and their logos are masculine (the bull of Merrill Lynch, for example). The financial companies have a poorer understanding of how to market their services to women. They haven’t fully realized what makes women investors tick, how they are different from men. In the most basic sense, the needs are the same – both men and women want to protect and provide for themselves and their families. So what compels women to have a deeper relationship with their shoes and handbags than they do with their money? So far, the financial services industry hasn't figured that out!
Men Are From Mars, Women…
A famous best-seller from several years back told readers that men and women are wired differently. Scientific methods have been used to confirm differences in brain activity patterns between men and women. Men tend to be more direct and action-oriented. Women tend to be more “connectional” or "relational." Studies show women use a lot more words to communicate than men, and that they do more multi-tasking.
Women may be more attuned to other motivations for investing. Performance matters, but making more money is not the only goal. There are many emotions attached to the use of money. Security and reducing risk is also very important to women. Unlike men, female investors don’t get overly euphoric and pumped full of testosterone when there is a big win. A loss does not result in a wound to masculinity. Winning and making money matters, but there is also satisfaction and pride in learning how to play the game better.
Calculus Not Required
As far as math skills are concerned, most financial functions for personal investing require addition, subtraction, multiplication and division, and perhaps how to calculate a percentage. One might require more skills if one plans to work on Wall Street, but for the average investor, math need not be an obstacle!
Start with Baby Steps
Many women don’t know where to start. They become dependent on other “experts” to give them financial advice, even though it is their income and money that is being invested. It is important for financial education to speak to women in a way that is accessible and encouraging.
Women already know more than they think. One way of approaching investing is to think of it like shopping. Women have skills in this area, especially if they have been shopping for their own needs or their family for a while. Those skills can be channeled and used in other areas of life, including the unfamiliar and sometimes scary world of investing.
The writer of this article is not a professional financial adviser or planner, therefore the information in these articles is for educational purposes only and should not be considered financial advice. Dedicated to my father, who was a real life "millionaire next door."
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