Several studies report that women have anxiety about money and lack confidence in their ability to manage it. A 2017 study by Merrill Lynch found that only 52% of women say they are confident in managing investments, and one in four said they have not planned at all for their financial future. We offer six financial tips for women who want to take responsibility for their financial security.
1. Actively manage your own money.
Whether you are single or in a relationship, you should always be involved in decisions about your money at every stage in life. Active participation in managing your finances has many positives:
- helps you weather a crisis more effectively
- prepares you to cope financially if you find yourself suddenly single again
- prevents you from being a victim of a partner’s poor financial decisions
- helps you optimize spending and savings habits
2. Save early and often for retirement.
The sooner you begin saving for retirement, the easier it will be – that’s the incredible power of compound interest. For example, saving as little as $300 per month from age 25 to 65, at an average return of 8%, would yield a retirement nest egg of a little more than $1 million. That same investment program started nine years later when 34 would grow to less than half that amount.
3. Keep an emergency fund.
No matter what size your household, you should have an emergency fund to help get through life’s inevitable surprises. Whether the furnace dies in the middle of the winter or you are laid off unexpectedly, an emergency fund provides a financial cushion to fall back on. Most financial experts recommend saving at least three to six months of expenses in an interest-bearing savings account.
4. Consider your potential longevity.
As a woman, you are more likely to live longer than a male partner and more likely to be single in your later years. This makes it especially important to actively participate in your finances and focus on saving to ensure you will be able to live alone comfortably later in life.
5. Be wise about investment risk.
Some people are more risk-averse than others and practicing a little risk tolerance when it comes to your investments is a proven path to growing a more significant portfolio. Investing all your retirement money in certificates of deposit probably won’t get you where you need to be, especially at recent low interest rates. Most financial experts recommend a mix of stocks, bonds and equities with different proportions depending on your age and expected years until retirement. Educate yourself through research or talking with an advisor to find a level of risk you are comfortable with, then implement the necessary changes to your investments.
6. Be careful about financial generosity.
Women often spend their retirement savings helping children and grandchildren. Money given away to others might never be replaced, and the closer you are to retirement, the less time you have to make up for the loss. So, put your financial security first and help only if you have extra resources to do so.
Budgeting is an important factor at any stage of life. Discover more about AAA’s financial services and speak to an agent today.