By Eric Muli
“Women are gaining financial independence to an unprecedented degree — they now make up the majority of college graduates, are nearly half of the labour force and are becoming the primary earners in many households. Yet most remain uneasy or uninvolved when it comes to talking about and managing money ~ USA Today
All facts on the table, women have come a long way; Women can do all the jobs that men can do (legally): they can vote and run for office. In addition, a significant number of women have also managed to leave major footprints in the world of business, health, engineering and several other industries all across the world.
However, despite all the obvious progress that women have made to be recognized and getting their fair share of the piece of the pie, statistics and data collected by Bloomberg LP show that only a staggeringly low number of women (22%) are comfortable making independent financial and investment decisions. Apparently, the majority of women are still dependent on their spouses, significant others and/or older relatives to make their investment decisions on their behalf.
So why are women less likely to be investing their money? Jane Parry of DLPB says women still displayed less confidence than men in their knowledge and understanding of investments and that in their survey, 17% of women said that the thought of investing was worrying and too much of a gamble.
A three-way conversation with two acquaintances working with a notable marketing company based in New York, started when friend X, began to discuss the different forms of retirement plans that their companies offered that essentially allowed them to retire with significantly more financial independence than it previously had. To X’s astonishment, she knew absolutely nothing about it and the more he went on about how a minimal investment of less than $100 a month could eventually compound into a nest egg of a million dollars or more at retirement, the more he sounded like a Geography professor lecturing to a 7am hall filled with drowsy, unconcerned and hangover college students. To avoid further self-inflicted humiliation, she promised her colleague that she would look into the paperwork and see if the idea of “basically free money” would make sense to her. On following up on whether or not she decided to enroll in the retirement investment opportunity that her company offered, sadly, apparently her life was too comfortable and too stable for her to start “sabotaging it with unnecessary risks.”
It is also important to note that after the numerous surveys and different studies, it appears that while both men and women do have financial goals and they both seem to be fundamentally different. For women, it seems that their main financial goal was essentially to be financially independent while the main financial goal for men was to retire early. Business scientists are starting to refer to this phenomenon as the “female financial paradox.”
Translation: Millions of women are perfectly happy to pinch at their monthly salaries and hunt down structured sales that could boost their monthly income but for the most part, they are unlikely to muster up the slightest interest in big-picture financial planning.
Like with any paradox, there are undoubtedly underlying factors that are fueling it. So how can women overcome this?
Of course low financial confidence does not translate nor does it directly relate to the overall confidence or self esteem of a woman. However, with the exception of the investment banker woman or the business graduate, most women, even some of the most successful ones among us shake in their shoes when they have to talk about their money and how it is not working for them. When it comes down to it, the truth is that our society is still suffering from a cultural history where women were left out of making financial decisions and many have been unknowingly made to think that the job of making their money work for them is not really their responsibility.
It is precisely this stereotype that has resulted in women who eventually find themselves in positions where these financial moves and decisions need to be made having to deal with a lot of fear; fear of the unknown and the fear of people knowing that they don’t know.
While it is not feasible for everybody to be 100% confident in every investment decision they make, here are a few things women can do to boost their investment confidence.
Ask Questions: Whether it is to a banker, advisor or significant other, it is quite important to ask as many questions as possible to ensure nothing is left to chance and that one fully comprehends the investment decisions as well as its potential impact on the future. Do your own research and due diligence. While trust is an essential part of business, doing personal research, by crossing the t’s and dotting the i’s themselves would definitely boost confidence. There’s no greater feeling than knowing for yourself.
Think Long Term: Financial independence may not last forever, and so investments should provide the extra buffer.
Be Selfish: Financial independence is great, but don’t you want more? A financial legacy or maybe just enough money for your children to be a step ahead of the game as they begin to look into their own financial independence and begin to throw around words like investments and portfolios. Think about it.
Millions of women are perfectly happy to pinch at their monthly salaries and hunt down structured sales that could boost their monthly income but for the most part, they are unlikely to muster up the slightest interest in big-picture financial planning, i.e. the financial paradox or in other words complacency. Precisely because of some of the historical and cultural facts highlighted above, women who find themselves in financially independent situations tend to do all that they possibly can, to retain this lifestyle and enjoy the benefits that accrue to a comfortable financial lifestyle.
Theoretically, while this way of thinking may seem to make sense, in the long run the lifestyle limits financial growth and could eventually lead to the crippling of the very same financial independence one has been striving to maintain all along. Anything could happen; emergencies, catastrophes, divorces, health issues etc. It is important for women to understand that investing money is not just about having money in the bank, but more about maintaining this so desired “financial independence” even when the world isn’t as good to you as it previously was. Fighting complacency is a mental challenge.
