Women live longer than men and earn less over the course of their careers, making it harder for them to save toward retirement. Financial fitness is an important factor in their wellbeing but women lag in comfort with financial planning. Only 26% feel confident in making investment decisions.
Panelists at the Women’s Leadership Institute on Amelia Island FL in December 2012 discussed ways women can empower themselves to be financially fit for the long term. “It’s a topic that women don’t often speak about casually in general conversation,” said moderator Marta Perez Drake, VP for professional development of the National Association of College and University Business Officers.
Without discussion, women can feel alone with their concerns over student loan debt, unemployed husbands or uncertainty over whether they can ever afford to retire. None of these struggles is unique. A goal of the session was to begin the conversation, which she hopes they’ll carry back to their home campuses. “It is very empowering for women to be able to talk about their situation,” she said.
Women are more risk averse than men. But they’re also more likely to make big financial decisions in a crisis than after careful planning. Panelists advised women to give the same attention to their financial health as they would to their physical health or their career. Find a mentor. Recognize generational differences. Take baby steps to save and invest or to reduce your debt. “Even if you do a little bit, that’s better than nothing,” Drake said.
Money management doesn’t have to be hard, and professional guidance is available. TIAA-CREF, the financial services organization that provides most retirement programs on campuses, has started a series of financial literacy workshops by and for women. The panel was designed to introduce and complement the workshops.
In 25 years at TIAA-CREF, Cathy McCabe has seen a lot about providing financial advice for women. She is managing director of its institutional business division.
Women face distinct challenges at different stages of life, family and career. Family structures vary and change as women stay single or become partnered, married, divorced or widowed. They may or may not have kids, who may be young dependents or adults on their own.
“We all want to retire at some time,” she said. Prepare by asking for advice and forming an action plan you can follow through all the changes of your life.
• 20s. As a “PANK” (professional aunt, no kids), she gives all her nieces money and the book On My Own Two Feet: A Modern Girl’s Guide to Personal Finance. Your 20s are not too soon to set up an emergency fund and start investing in your employer’s 401K, hopefully with an employer’s matching funds. Build a good credit history by using credit cards and paying them off each month. Make a plan to survive if you or your partner loses a job.
• 30s. Continue to save for retirement, buying a home and sending the kids to college. If your family depends on you financially, life insurance is a must.
• 40s & 50s. In these years you can save larger amounts through your IRA or your employer. You are likely to be a caretaker at some point in this period, helping your kids to settle into adult life after college or tending to elderly parents. Get long-term care insurance. Her mother, a college professor with seven kids, was widowed at 52; after a stroke at age 73 she lived 10 years in assisted living, paid for by her long-term care policy.
• 60s. “This is the red zone, time to get very serious and intentional,” she said. Women who retire at 65 on average will live 18 years in retirement. Take advantage of tax-effective ways to save money.
Everything is a choice
Personal experience has taught Dana Bradley, assistant VP of human resources at the University of Chicago, to be a smart consumer. “The less you spend, the more you have to invest,” she said.
Her first job after graduation paid enough for a down payment on an apartment, a car payment and food. She managed to save $50 from her first paycheck even though it was much less than she expected. She got into a corporate 401K. A guy she was dating asked how much debt she had and told her to pay it off. “Those early decisions were the key to saving money,” she said. Bradley really wanted a bedroom set, advertised as “90 days same as cash,” but was shocked at the overall expense. “It was a tough life lesson: Don’t finance your purchases,” she said. Wise decisions included buying a house in a good area, that had appreciated when they moved and setting up a 529 college savings plan for their baby.
Four words women need to use are “What’s your best price?” Everything is negotiable; it’s all about the deal. Her goal is to spend wisely to buy nice things at the lowest price, so that she can save and invest for the long term.
They buy certified pre-owned cars and drive them a long time; her current car is a 2004 model. Learning from their example, their son said in second grade, “I know you’re not going to buy those Band-Aids because we can’t afford them.” She told him it was because they weren’t on sale.
Now she’s in her 40s and looking toward retirement. A financial advisor helped her to set goals and stay the course. Freedom from debt removes a burden; if you have debt, make a plan to pay it off.
“We underestimate how much we need to retire comfortably,” she told WIHE. Women tend to put financial planning on the back burner to deal with priorities like work and family, while relying on partners to manage their money. We need to take an active role in building our own financial literacy.
Start where you are. “Don’t wait until the right time to start saving and investing. The right time to create and implement a plan is now,” she said. You will see growth over time and increase your confidence that saving for the future was the smart choice.
Independence and self-care
Self-reliance has always been a way of life for Dr. Teresa E. Smith, VP for administrative services and chief financial officer of Tallahassee Community College FL. Her parents grew up during the Great Depression, raising five girls and a boy in rural South Carolina. The older kids looked after the younger ones; all did lots of chores.
“My father didn’t realize we were girls,” she said. She learned to drive a tractor and opened a bank account as soon as she could write. She saved her birthday money from first grade on, started work in a grocery store at 14 and was required to save at least half her earnings.
Although she figured out during puberty that she wasn’t a boy, she planned not to have children or to need a man to take care of her. Having been raised not to buy anything they couldn’t pay for, she and her sister worked their way through college.
She worked fulltime from age 19 on. Her company started a tuition plan; she earned bachelor’s and master’s degrees completely paid by her employer. Since her investment in the company 401K came straight out of her paycheck, she never missed the money.
She learned to distinguish wants and desires from needs. One may need a car, but a Mercedes or Cadillac is just a want. “If I can’t afford it, I don’t buy it,” she said. Other than her home mortgage, she has never been in debt. She has bought three cars new and driven each of them for more than ten years.
Staying self-reliant and debt-free allowed her to relocate for a promotion and to get through a serious illness without worrying about how to cover costs. She dropped her life insurance; she doesn’t have kids and her niece doesn’t need it. The flip side of independence is personal responsibility. “Since I’m without kids, I’m going to be in a nursing home, so I’ve got to take care of myself.”
She noted that women have traditionally been regarded as nurturers who focus on the common good rather than on themselves. But with a divorce rate over 50% and women being the primary breadwinners in many families, women need to take control of their financial future. Negotiate boldly to push for equal pay. Explore flexible, work-at-home opportunities if family needs limit your job options.
Consult a financial planner and diversify your investments. Pay yourself first; set aside 10-15% of every paycheck for investment. Women live longer than men and need to prepare for it. “You must be able to support a comfortable lifestyle until you are 80+ years old,” she said.
For your children—or your passion
One of TIAA-CREF’s pilot workshops for women was held at the Women’s College of the University of Denver, where Dr. Lynn M. Gangone is dean. Of the 97 women who took part, about half consulted a financial advisor afterward. “Women in all-woman environments are much more honest about their financial circumstances,” she said.
1. Regardless of your current marriage status, take care of yourself as though you’re single. Many women have found themselves with no money when they lose a partner to death or divorce. She has long-term care and disability policies in addition to what her college provides.
As a lesbian who came out in the 1980s, she believes the lack of legal protections has made her more deliberate. “Anyone who is not legally married has to be really clear,” she said, not just in wills but also in home ownership, medical and legal powers of attorney and beneficiaries of insurance and retirement plans.
2. Manage your finances with intent. “Women in most families control the wellbeing of the household but don’t think about their own needs,” she said. Learn to negotiate more assertively for yourself, a weak area for many women. She shops the sales to dress better than her salary would seem to support. To lead a women’s college, her dream job, she took a pay cut. Plan ahead so you too can afford to follow your passion.
3. Learn from your mistakes. When she left her first job, she had unwisely pulled her money out of her retirement fund. “We make mistakes. Learn from them and move on. Give yourself permission to say that you have not done everything perfectly,” she said.
4. Don’t carry debt. The oldest child in a family with little money, she put herself through college. She pays off her credit cards every month and waited until she was in her 30s to buy a house. If you need a loan, take advantage of today’s low interest rates. Know your credit score; those at 800 are doing really well, but those with scores under 700 may have fewer options.
5. Use your TIAA-CREF advisors. “They’ve always worked in higher education so they understand us,” she said. They work hard to assist families of all types. If your university offers a dollar-for-dollar match on a part of your retirement savings and you don’t take advantage of it, you are leaving money that you have earned on the table.
6. Have an attitude of abundance. In these crazy financial times, it’s easy to get caught up in the swirl of national issues like the “fiscal cliff.” She encourages women not to get overwhelmed but to think of one change they could make to improve their financial fitness. “If you can’t do it for yourself, do it for your children,” she said.
Contact the panelists:
Cook, Sarah Gibbard. (2013, March). Take Action to Empower Yourself to Financial Fitness. Women in Higher Education, 22(3), 21-22.