Both the amount of wealth controlled by women and the rate at which it is increasing are extraordinary. Today, women control 51.3 percent, or $14 trillion, in personal wealth and that figure is expected to grow to $22 trillion within the next decade, according to the Family Wealth Advisers Council.
FWAC reports women continue to increase their skills, pursue higher education and comprise nearly half of the workforce. They are more involved than ever in their households’ investments and financial decision making. According to a Prudential Financial Inc. (NYSE: PRU) study, 95 percent of women will be their family’s primary financial decision maker at some point in their lives.
Women desire to make informed and beneficial choices for themselves, their families and their communities. Moreover, the economic crisis has heightened women’s recognition of the need to develop a financial plan that will meet long-term financial goals. That’s why it’s essential for women to understand the opportunities and challenges to their financial freedom.
Women continue to reach their potential and are outpacing men when it comes to education and earning advanced degrees. According to the White House Council on Women and Girls study, “Keeping America’s Women Moving Forward,” more women than men receive bachelor’s degrees, master’s degrees and doctorates in the United States.
Women also are creating jobs and generating significant amounts of revenue as business owners. Nearly 8.3 million women-owned businesses exist today, employing 7.7 million people and generating nearly $1.3 trillion in sales revenue, according to an American Express Open study.
This new-found higher earning power presents women with the challenge of developing a sound financial strategy. Women should take a comprehensive approach to invest and grow their income in addition to protecting their assets with a professional estate plan.
Experiencing divorce or death of a spouse has both emotional and financial ramifications. It is not uncommon for women experiencing divorce to report less household income than men while bearing more responsibility for child care costs. The question most women in this situation have to ask themselves is, “How do I ensure the financial stability for myself and my family?”
Given that women usually live longer than men and take on many different roles throughout their lives, there is an increasing need to know how much to save for retirement, how much is needed for an emergency fund and the possibility of caring for another person, whether that individual is a child or a parent.
Conversely, women’s career paths can be choppy when they opt to take time out of the workforce to raise a family. Time away from a career can have a major impact on future promotion opportunities as well as savings and retirement benefits. By spending time out of the workforce, women forgo income, miss out on pension plans and the ability to grow retirement savings by contributing to a 401(k) or from receiving less from Social Security.
Following a few key steps can help prepare for that fincial future.
• First, know your financial situation. Make a list of your assets and liabilities. Take an honest look at your income and your expenses. Are your assets titled correctly? Are your current beneficiary designations appropriate? At a minimum, have a plan for retirement, update current beneficiary designations and select the appropriate individuals to serve as financial and health care powers of attorney.
• Examine your credit history and insurance coverage. Do you have credit in your own name? What are your credit limits and what do you owe? How do you prepare for the worst case scenario? Review your insurance coverage and work with a professional to ensure you have the appropriate coverage with financially sound companies.
• Define and establish your financial goals. What are your priorities, responsibilities and dreams? These will be unique to every woman. Identifying whether you want to retire early or leave something to charity can be very motivating and help you commit to your financial plan.
• Establish a comprehensive plan with someone you trust. Have you ever met with an adviser and felt like that person didn’t hear what you were saying or dismissed some of your concerns? Studies show women relate and communicate differently than men, sometimes by telling stories or preferring to collaborate when working with others, even with professional advisers. Women should choose an adviser that they feel comfortable with and creates an inclusive environment, including collaboration on an interpersonal level as well as being a good listener.
Within the next decade, women are expected to control a larger portion of personal wealth. With great power comes great responsibility. Women who are the major breadwinners will want to judiciously invest their family’s money and help secure its financial means.
Andrea McKinney is vice president of wealth management with the Springfield branch of Central Trust & Investment Co. She can be reached at Andrea_McKinney@centrustco.com.
