Fifty years have elapsed since the Equal Credit Opportunity Act passed in the U.S., giving women the right to pursue a loan or a mortgage and increasing the chance for financial freedom. Women continue seeking ways to grow their wealth, yet systemic barriers persist. Surveys, such as a recent one in Ellevest, show 94 percent of women feel their economic power is being underestimated. Reports show the gender wealth equity gap outweighs the gender pay gap whereby women own an average $.32 to $.55 for every $1 men own, and women of color face an even larger deficit. This gap negatively affects women’s confidence in their financial acumen. Long-standing, generational beliefs prevent women from discussing money and finances with family members. Nevertheless, winds of change are stirring.
Currently, Baby Boomers own approximately half of American wealth. As this wealth continues to transfer, women and younger generations will inherit assets with women poised to be the majority recipients. Known as the “Great Transfer of Wealth,” this advancement can reduce previous barriers blocking women from achieving financial freedom.
According to a McKinsey & Company survey, “By 2030, American women are expected to control $30 trillion in financial assets that baby boomers will possess—a potential wealth transfer of such magnitude that it approaches the annual GDP of the United States.” Experts estimate the total amount of transferred wealth among the generations to be up to $84 trillion with the greatest impact felt in the next three to five years.
There are several reasons why this shift in wealth sets women up to hold more economic power:
1. Women live longer than men. Statistically, wives will outlive their husbands, and these women will obtain the opportunity to make independent investments.
2. More women make the household financial choices. Women decision makers increased 30 percent over the last five years in American households.
Anne Sapienza, CRPC, a financial advisor and partner with IAG Wealth Partners in Waukesha, WI, says, “Ninety-five percent of women will be the family’s primary financial decision maker at some point in their lives. To that point, half of all women over age 75 are widowed. The U.S. Census also reports that the average age of widowhood for women is only 59 years old. To be clear, financial independence is not about how much money someone has, and women can no longer be an ostrich by sticking their head in the sand, when it comes to money management.”
3. The number of women breadwinners increased in heterosexual households
4. Younger, single women in the workforce recognize the need for financial independence earlier than previous generations. They’re educating themselves, aligning resources and saving earlier in their careers.
Can this significant shift impact society and create a positive ripple effect to help others? Consider these three ideas:
One, women tend to spend their money differently than men. They are more likely to donate it and invest for impact. Top causes important to women include environmental, education, and ones helping women and children. Two, women like working with women and want to work with professionals who listen to their wants and needs. The trend favors female entrepreneurs fighting for venture capital investments. Previously male-focused industries, such as automotives, needed to align their value proposition statement with the female-buying criteria. Traditionally male-led industries, such as financial advising, must consider hiring and retaining women advisors. Three, it could diminish long-held beliefs that women are not savvy enough to talk money and finances. Women’s confidence increases as their wealth increases, and they are teeing up to be the driver of these conversations.
Regardless of whether you are set to inherit wealth from family members, there are several key strategies to increase financial confidence and personal wealth. Sapienza shares the following tips for you to consider:
1. Educate yourself with the myriad of free seminars financial firms offer on a variety of topics, ask questions, and join online discussion groups geared toward women.
2. Take advantage of employer benefits, especially if they match contributions, and make a habit of deferring income for each paycheck. Not only does it reduce taxable income, but the power of compounding starts early. Create a budget and a vision for your future to curb unnecessary spending today.
3. Partner with a financial professional, licensed as a fiduciary, to set goals and create a roadmap to reach them. Make sure you have a plan for your investments and to insure against risks.
4. Be willing to take a chance. Statistically, women are more risk averse than men, keeping to conservative portfolios and excessive cash at the bank, which translates to 10 percent less than men in retirement savings by age 65. Understand there will be market swings. Stay diversified—it should pay off in the long run. 5) Address potential threats head on with a strategy and make sure your estate plan is in order. Talk with your trusted professionals about taxes and estate transfer techniques, as well as unexpected events such as illness, death, planning for special needs children, and debt reduction. Have these same conversations with loved
