Tackling a Knowledge Gap to Take Control of Financial Future
By Daniel Yuhn and William Jeffrey,
Legatia Wealth Advisors LLC
Recent surveys regarding women’s attitudes, knowledge and involvement in their financial lives have revealed that women are more interested and informed about money than ever before. In fact,
- 42% of women say they are more knowledgeable than five years ago;
- 64% feel more knowledgeable;
- 55% have invested for their retirement;
- 70% say the more money they have, the better they feel.
However, women remain uninvolved in issues critical to their long-term welfare.
- 80% wished they had learned more about investing growing up;
- 60% do not understand how a mutual fund works;
- Only 35% consider themselves very or somewhat knowledgeable about investing.
A recent AICPA survey showed that American women strongly believe they need to learn more when it comes to managing their finances. Seventy percent of women indicated problems with credit card debt and savings strategies, while 30 percent described themselves as "confident" or as a "risk taker" when it comes to managing their finances.
That means a large percentage of women are not confident when it comes to investment and financial planning. And, they actually have more at risk. Why?
Based on research from some investment companies, nine out of 10 women will be solely responsible for their finances or their family’s finances at some point in their lives.
Women need more in retirement because on average they live longer than men. Currently women represent approximately 72 percent of social security recipients age 85 and older. (Source: Social Security Administration). Unfortunately, women on average make less money than men and spend fewer years in the workforce due to family care giving constraints. The reduced time on the job and unequal earning translate into less money contributed to retirement savings plans.
Avoid Common Mistakes
Women invest later in life and more conservatively. Because women may
not be completely comfortable or familiar with some investments, they
postpone investment opportunities. These missed opportunities diminish the
power of compounding interest on your investments. Ideally, investments
should outpace inflation after taxes. A too-conservative approach increases
the chances that retirement dollars will be eaten up by inflation.
Women are less likely to participate in the company retirement savings plan. If your employer offers a plan, you should participate, especially if the plan offers a matching contribution. You are never too young or too old to save for retirement.
Women are much more likely to take care of family “wants” before saving for their own retirement. Even regarding education, your children can borrow funds through financial aid or receive assistance from scholarships and work study programs.
Good News
The good news is that women are smarter investors. Based on a study
conducted during the mid 1990s by the University of California, women’s
portfolios outperformed men’s by 1.4 to 2.3 percent. What secret factors
account for this result?
Women spend more time researching their investment choices, according to the National Center for Women and Retirement Research. This process keeps women from chasing the “hot stock” on a whim. Since women are typically not impulsive or over-confident regarding trading, they have the tendency to stay on track with their investments. Women consider the products, services and the ethics of companies before investing.
What to Do Now?
There are many ways CPAs can get involved in financial literacy efforts
for women and the general public. First, members can visit the
MACPA financial literacy web page to learn about Association-sponsored
efforts, including the Accounting Blitz with Junior Achievement, tax
preparation assistance with VASTMI and development of financial tools for
families in hospice care.
Through the 360 Degrees of Financial Literacy program, sponsored by the AICPA and state societies, members can access free online training, volunteer on a national database and access a variety of resources.
About the Authors
Daniel Yuhn and William Jeffrey are partners at Legatia Wealth Advisors
LLC, Troy. Yuhn serves on the MACPA’s Personal Financial Planning and
Financial Literacy task forces. Be sure to look for their upcoming articles
on specific issues addressed here, as well as practical advice for
incorporating these solutions into your practice.
| Women's Financial Literacy Campaign to be Launched by AICPA and National Endowment for Financial Education with The Advertising Council Public Service Advertisements to Stress the Need For Women to Take Responsibility for Better Money-Management Behaviors Last June, the AICPA partnered with the National Endowment for Financial Education and The Advertising Council, to produce America's first, national financial literacy campaign targeted toward women. The three-year program is designed to help women across a wide demographic group to become more aware of financial literacy issues. The women’s financial literacy effort is just one element of the AICPA’s overall financial literacy effort embodied in the 360 Degrees of Financial Literacy program. The AICPA also has established the National CPA Financial Literacy Commission, headed by Carl George, CEO of Clifton Gunderson LLP, a regional CPA firm based in Illinois. Under his stewardship, the Commission will offer thought leadership in financial literacy and build liaisons with key influential groups in this area. Women's financial literacy information will be available about the National Endowment for Financial Education - The Advertising Council initiative through a toll-free telephone number or by visiting a web site, both of which will be advertised through the public service campaign. To assure CPAs are prepared to be successful volunteers in their communities, the AICPA has created a new online course, offered to AICPA members free of charge to review crucial financial literacy issues. CPAs who complete the course receive two CPE credits from the AICPA. 360 Degrees of Financial Literacy: Consumers can find information to help them make sound financial decisions at every stage of their lives, from childhood to retirement. Financial Literacy Volunteer Database: The AICPA has established a volunteer database where members can register their interest in participating at both the national and local levels in the financial literacy effort. The database is available online through the AICPA Volunteer Central. The MACPA, as well as other state societies, are utilizing the database to identify members who are interested in financial literacy. |