How would you encourage women to become more involved in their financial planning?

Question

Most Canadian women are disinterested and unprepared when it comes to planning their financial futures, according to a recent survey by TD Waterhouse.

If that’s true, how would you suggest encouraging women to become more ‘invested’ in their personal finances?

Read more: "Many Canadian women avoid financial planning: study"

http://ca.news.yahoo.com/s/reuters/071126/canada/canada_investing_col

Answer 1

I am an economist, a former financial planner, and one of Marketocracy.com's Master's 100. http://www.marketocracy.com I am strongly interested in behavioral finance and this question has bothered me for some time.

In my personal experience there are four gaps. First, and this applies equally to men and women, it is boring to most people. If it were exciting, everyone would know how to do it. So there is a large issue with the form of financial education. It is one of the areas I have worked on, eliminating the yawn. However, and this comes from studies on engineering education rather than finance, it appears that women learn topics similar to finance differently than men and that to some extent the way it is taught triggers self selection bias out of the field of study. I believe much of the skills needed are taught by men for men, in a way that is cognitively valuable primarily to men. There is no intended bias at all, but I am pretty sure it exists. In my experience, many life skills natural to "women's roles" should make them superior investors to men, but unless you are a truly good investor with a decent idea of the behavioral elements behind good investing, you won't notice them. I wish I had many of my wife's skills, my portfolio performance would probably improve.

The second issue is that women seem to embrace variance less than men. I have read research on commercial loan outcomes between men and women and there is less variance among women borrowers, in outcomes, than men. This would imply that women prefer lower natural variation. This may be a gender bias, but it could also be a consumption bias instead. The consumption literature implies that people are "risk loving" in transaction size. That is the larger the transaction, the more risk they are willing to take. It is counter-intuitive and does have a rational explanation, but true. If female income is less than male income, then other things constant, should engage in smaller transactions. It is simple to engage in low variability transactions, go to a bank and open an account. It requires little emotional, personal or educational involvement and satisfies an underlying emotional need, or utility as us very boring economists would say.

The trick around this is rather simple, education which changes how they feel about a future outcome over what they feel about the present state. I have long found that people will not change their behavior from cognitive education. You have to feel the change to do the change. Everyone prefers to maintain their own misconceptions of the world, than change them. Watch "A Private Universe," by the Annenberg Foundation and you will see what I mean.

Third, to be "invested" in your personal finances it must appeal to you. If it does not already appeal to you as a topic, then the things around the topic need to change. The regulatory structure of financial institutions is very cold and impersonal, providing clarity and little in terms of feelings. Banks, for example, are the only sales driven organization in the world that beg their customers to go away (use ATMs, online banking, debit cards, automatic payroll deposit). There are even banks in the United States that bill their customers to walk in the door.

Pick up a Wall Street Journal and pick up Oprah's magazine, they have about the same circulation, they do not have the same gender distribution of readers. We do not have natural social structures, magazines or institutions that approach the world interpersonally in the field of finance. Investment clubs, unfortunately, are poor substitutes for professionally organized equivalents and the statutory structure limits what can exist. I have been working on curiculum to do just this, but it is still in its infancy in many respects and there hasn't been an objective test to see if it matters either, other than student evaluations at the end of the semester.

Finally, really talking about financial planning means talking about potential death, illness, disability, disease and loss. No one likes this, but in many respects women should have an advantage here. Women, more often, are the caregivers in a family and the well being of the family is of deep concern. While this should motivate engaging oneself in this issue, the day to day experience of maintaining a family is exhausting and so passing over this responsibility to a husband or boyfriend permits rest. It takes energy to engage and children love sapping your energy.

So, remove the yawn, specify behaviors so they can feel the change, present in a way the audience needs it presented, permit a reordering of topics from how it is normally presented, play to natural strengths, and put it in either a social structure that is natural in groups of women, or in small bites so that it can be consumed between the time when one child takes another's toy and scream for the referee and when the children notice they are hungry.

Answer 2

Parents must begin by instructing their daughters that this is not a fairy-tale world. Everyone must be responsible for their own financial, physical and mental well-being. Too many girls have been taught that the financial dealings in their life will be their "husband's job", and they needn't worry about it. Financial and fiscal responsibility must be encouraged, from a very early age. "The Wealthy Barber" should be a must-read for every child, and families should be open, honest and encouraging with regard to financial discussions, including investment suggestions and concrete and viable ways that a child, male or female, can plan for their own financially secure future. This is just a hang-over from the time when the male marriage partner made all the financial decisions -sometimes, women didn't even known how much money was in the bank! There are still too many women in relationships who have absolutely no idea about the financial aspects of their marriage. When their spouses die, it is a big learning curve at a time when they don't need the stress. Women will get better at financial management and planning, but it will expedite the matter if they are taught that there may not be a white knight on the horizon that is going to sweep away all of their financial concerns, and that in order to succeed in life, they must take a hold, in an informed manner, of their own financial future.

Answer 3

If only women could see into the future. No one ever thinks when they're young that life will come to throw them all kinds of curves, that responsibilities arise, causing you to compromise your career, ailing parents, sick children, sick YOU--something can happen to your spouse, etc. etc. etc.

Everyone thinks there will always be "time" to worry about that in the future, but that's not the case for the majority of women.

I tell all young women today to invest about 10 percent of their paycheck into their future--RRSPs preferrably. You just never realize how quickly the years pass and before you know it, you're at that 50 something age and how nice to actually say "Boy I'd like to retire" and be ABLE to really do it.

Even a two income family these days struggles, and so putting away $50-$100 a pay may seem like a lot but as an investment in your future it's not.

Another wise investment is real estate. Simply coming up with the downpayment is a feat for most people, but that rent money is wasted when it could be going towards paying off a home and building equity.

Answer 4

Like a lot of women, I was really unaware of what I was doing financially. I had sat down with an advisor from one financial institute (who also happened to be a woman) and left feeling like I hadn't really talked about what I went in there for - some direction on my savings and future investments. Recently, I took on a job at another financial institution. I have a better understanding of what's going on now. The key is, I think, to find an advisor or financial service rep who is willing to take the time to hear exactly what you want, and then explain what your options are in order to do what you need to do; and they need to explain it in a way that you will understand. You may want to find a financial advisor who is a woman (and there are a lot out there, trust me!) or get a referral through a friend. The trend I see now is more women asking about mutual funds, GIC's and RSP's - don't let your husband or significant other or your fear/apprehension take the helm. If it's your money and you want to know what to do with it, you have to ask. Don't be afraid to speak up and say you don't understand. A financial advisor's first concern should be that you feel like you're making the right decision. If you feel uneasy, go to another advisor or another institute all together. Since I began with my financial job, I've had mutual funds and RSP's explained to me. I'm 27 and I just had two RSP accounts opened for me. I don't know what I'm going to do with the money, but I do know that it's going to be there, and I know that my FA will answer any questions I have.

Answer 5

I would like to state first that I am only 22 and started worrying about investing at 16, I know plenty of women who have done the same thing. As far as investments, I find most people aren't interested in them. They seem even jelouse and assume I am rich, when I tell them what they can do to change their financial situation (female or male) they seem overwhelmed. The main reason men worry about money is because they assume they can get a girl with more of it. But the truth is the body politic doesn't know how to invest and nobody cares to teach them. This in my experience is not just a women's issue we are not the only ones who seem "overwhelmed" with calculating large numbers.

Answer 6

I find this article rather timely and interesting as I am currently reading an excellent book at the moment that addresses this very issue. It is called PRINCE CHARMING ISN'T COMING by Barbara Stanny (I was able to get it at Indigo).

I agree that there are already a lot of excellent publications out there (Suze Orman, Rich Dad, Poor Dad, Wealthy Barber, etc.--and I must confess, I haven't read all of these) but the book that I am currently reading has never been recommended or referenced to the best of my knowledge and I find it to be a great, accessible read and personally I think every woman should read it.

For any woman out there that feels a little intimidated and/or overwhelmed--this is a great book to get one thinking about taking financial control and finding the motivation and inspiration to get started. I know it's certainly got me thinking.

Answer 7

First of all I believe that TD is mistaken in interpreting the lack of Women investors in their system as "disinterest" on the part of females. To most of the Women I know- Financial planning can't extend beyond where their next meal is coming from and how to pay the Daycare so they can go to work... Fancy planning means financing an extra curricular school trip or making sure Santa Claus comes- from the grocery money or GST rebate cheques. (married women simply subsidize their husbands and they survive together.) TD could encourage a lot of women only by relaxing current interest rates and banking fees, rules and old stereo-typing, customizing loan repayment schedules and making information about the costs of borrowing and credit counselling more straightforward and available--For women whose income is a secondary one to their husbands- Help him and you'll help her. No one can "invest" until they can achieve a decent standard of basic essentials- food, shelter and clothing. TD is blind to the number of "working poor" there are in the real world-especially women- I'm pretty sure most women would be more interested if they had the time and energy and (of course) money left from scraping by. To these women- TD survey is irrelevant and silly. Their "disinterest" is an unwillingness to waste their precious time and -if they are unprepared- it is not entirely their fault.

Answer 8

Finance is very masculine and is probably not attractive to women because of the approach used. It sounds very complicated, cold, serious, aggressive even... To encourage women to become more involved in their financial planning, I would provide information in a "women way"... like having group sessions of information for women on finance, with coffee and sandwiches, or offer consultations specifically designed for women. They need to discuss it, either with professionals or with their peers, and enjoy discussing it, not feel pressured.

If they feel Finance is also applying to women, I'm sure they will soon become Grade As students in Finance!

Answer 9

Have you ever thought that perhaps women WOULD be more involved in their financial planning if they were paid equally to their male counterparts??? Women are still not making as much as men doing the same jobs. Also, most women who are in a relationship allow their male partner to take care of the finances because it's the 'norm' in society. There are many factor's, such as the one's mentiond here, that contribute to women not being more involved in their financial planning.

Answer 10

I think women are not taught or encouraged to think about financial planning and investing, I know I wasn't. Most of us once married, find our husband earns more and he does the planning or we may do it together but not necessarily how we would do it on by our own choice.
I invest but do not think that it is a 'must' for everyone. We each need to take stock of our lives and decide what it is we want in terms of financial independence or security. Whatever I could save from the household monies my husband gave me I put away quietly for myself to decide how and what I would spend it on.
After I was divorced and working I started with a savings account at my bank. From my work earnings I bought into an RRSP every year. Then I bought a house. I kept on top of my income tax situation so I would never owe anything in any year. I did not use credit cards unless I travelled and then for emergencies only.
Eventually I wanted to move so I sold my house, moved and bought another. It was worth more than the first one. I am now in my 4th house and have made money each time.
When I decided to get into investing outside of my RRSP I bought a years' subscription to a Toronto weekly financial paper that was mailed to me and I read it cover to cover to become familiar with terminology. Gradually I began to understand a lot of how it all works. Then I found others who were already investing (including men) and I would ask them questions, I never assumed I knew anything - that is the best way to get people to share information with you.
started with penny stocks. even just 100 shares at .20 a share. Not too much to lose but a lot to learn and become comfortable with. Then I would buy maybe 10 shares only at $20 a share or maybe more. I added to that once or twice a year. I learned how to buy stocks online (about $29 a transaction)- it is much cheaper than a broker (about $85 a transaction).
Now I can go to a board meeting and make a motion and vote with confidence on issues that come up.
We need to look for investments that reflect our values, it is called Ethical Investing or Socially Responsible Investing - jantzi.com has info on that although I would not agree with some of their choices.
Realize it is a learning process like walking...it takes time, one step at a time, confidence in yourself and willing to take responsibility for your losses as well as your wians. Go slowly. But always keep three months living expenses in your savings account - just in case :)
Buy low, sell hi and don't sell emotionally, almost everything that drops in price comes up again and goes to a higher point. Be patient. All the best to you....

Answer 11

I think that this is an over generalization and likely generated by a need for furthering the agenda of TD. My wife is very involved in our financial situation. In fact she is quite a bit more involved then I am for the simple fact that she is far better at it.
I would recommend anyone do a little personnel research on the topic before jumping on the band waggon.