Financial Advise by Women for Women

Financial Advice by Women for Women
By TARA SIEGEL BERNARD
Published: April 23, 2010


The titles may seem better suited for the cover of Glamour magazine. But that doesn’t mean women don’t face special financial challenges. Women live longer, earn less and take more breaks from the workplace to care for children and elderly parents. And though studies show that women tend to save a slightly higher percentage of their paychecks then men, they ultimately end up with smaller balances because of their lower earnings.

Does that mean women need specially tailored financial advice?

Women who are suddenly single, like divorcees and widows, obviously may need help. And singles, in general, may have special needs, like disability insurance, because they don’t have a spouse’s paycheck to fall back on (though you can make the same case for single men). Financial advisers also say many women need to be prodded to evaluate whether they’re being paid what they’re worth.

But the vast majority of the financial advice is the same, regardless of sex.

The real issue, experts say, is that many women, despite strides in education and in the workplace, simply aren’t as confident and knowledgeable about financial matters as men. This problem persists even as women handle many of their families’ routine money management duties, like paying bills and making many purchasing decisions.

“Research has shown that women, even professional women with good jobs and successful careers, tend to be less financially literate than men,” said Annamaria Lusardi, an economics professor at Dartmouth College who has studied the issue. “The gap in financial literacy between women and men is large not only among older people, or those 50 and older, but also among young adults, an age group where women are more likely to have a college degree than men.”

That’s similar to what Eleanor Blayney, a financial planner who focuses on middle-age women, said she found when she gave a speech to her fellow alumnae at Mount Holyoke College a few years ago. “At the end, the hands went up, and they were all stuck at the very beginning of my speech,” said Ms. Blayney, who has a new book on the subject, “Women’s Worth: Finding Your Financial Confidence” (Directions). “They were scientists, professors, municipal elected officials. These were women with brains and jobs, and they were just at a loss to even know where to begin.”

Not all women lack financial skills, of course, and many may simply lack time. But studies show that women don’t find money and investing as interesting as men. Women also prefer to learn about money in person or in groups with others in their situation, as opposed to curling up with a book (the jury is out on whether pink covers help).

According to a 2007 study on gender differences by Tahira Hira of Iowa State University and Cäzilia Loibl of Ohio State University, women are still less likely to be socialized in financial matters, and they are more likely than men to find investment decisions stressful, difficult and time consuming. The study also found that it often takes a life event, like getting married, to prompt women to save and invest, whereas men were more likely to start investing gradually.

But while women may be less likely to enjoy investing, studies show that they may inherently be better investors than men. Females are less prone to risky behavior, for instance, and, unlike their confident male counterparts, they’re more likely to fess up to their own ignorance.

“One reason that women might be better financial decision makers, despite displaying, in general, lower literacy than men, is that women know what they do not know,” said Professor Lusardi, who is director of the Rand Financial Literacy Center..