Your Investments: Financial management for women

As women are becoming more educated, they will have more money, increasing the need become educated investors.

Money cash Shekels currency 521 (photo credit: Reuters)
Money cash Shekels currency 521
(photo credit: Reuters)
As women continue to play a greater role in the workforce, the need for them to manage their finances becomes even more important.
In an eye-opening article in US News & World Report last week about the state of women in the US economy, Rick Newman wrote: “But women tend to be better educated than men, with more relevant skills, which means economic power will continue to shift toward women, as it has been for the last 20 years. The unemployment rate for women, for example, is 8.1 percent, while it’s 8.3 percent for men. During the recession, the gap was much bigger, favoring women by more than two percentage points for many months. That overall trend is likely to persist throughout the recovery.”
There is a lot of evidence out there confirming that the more education a person has, the higher his or her earning power. According to the Lumina Foundation, “Individuals with a bachelor’s degree now make 84 percent more over a lifetime than those with only a high school diploma, up from 75 percent in 1999. Today, bachelor’s degree holders can expect median lifetime earnings approaching $2.3 million. By comparison, workers with just a high school diploma average roughly $1.3 million, which translates into a little more than $15 per hour.”
This is not just a current problem. It’s clear that in the future, as technology plays an even larger role in our lives, higher education will be a prerequisite for economic growth. Jamie P. Merisotis, president and chief executive officer of Lumina said: “The vast majority of new jobs require higher skills, and if you don’t have a college degree, your chances of being in the middle class are visibly diminished. There is a high probability that you’ll be poor without some form of postsecondary education, and that makes education one of the most critical factors in our nation’s long-term economic growth plans. A dramatic increase in educational attainment must become a top national priority if we intend to build our labor pool and beat out other countries for the jobs of the future.”
Go to the head of the class
Women have taken the education lead and are not looking back. I think this trend is even more pronounced in Israel, where because of differences in length of army service, women get a head start on their university education.
According to Newman: “The educational advantage women have is striking. Women will earn 55 percent of all bachelor’s degrees conferred this year, according to the Department of Education, plus 60 percent of all master’s degrees and 53 percent of all medical degrees. By 2020, those proportions are projected to be even higher. Men today earn a slightly higher portion of professional degrees, such as MBAs, but women will outnumber men in those, too, by 2020.
“Education is still highly correlated with future earnings, despite mitigating factors like the mounting debt load some graduates have. So women will get ahead simply by virtue of their knowledge and credentials. Women also tend to have training in fields projected to grow the most. Merrill Lynch points out that in the fields likely to add the most jobs through 2018 – including nursing, other medical sectors, accounting, and post-secondary teaching – women have a growing proportion and in many cases a majority of the jobs.”
Educated investor
As women are becoming more educated, that means that they will have more money, and the need to become an educated investor takes on even more importance. Unfortunately, when it comes to money, while women make better investors, they often lack the confidence to invest in a correct fashion.
“Women need to stop believing that investing is too hard or too complicated,” said Sandra Claflin-Chalton, a professor of economics at the University of Wisconsin-Stout. “My experience has been that once women learn the basics, they have excellent instincts and are much better at finance than most men.”
While you don’t have to become a do-it-yourself investor, take the time to learn the basics of investing so that you can challenge your adviser and make sure he or she is really doing what’s best for your portfolio.
Are the investments specifically tailored to meet your specific goals and needs? Make sure that you understand not only your investments, but what fees you are paying your adviser. Are you paying on a “per transaction” basis, or are you paying an annual fee? To my chagrin, there are many advisers who will push the envelope and attempt to charge unusually high fees. Unless the client pushes back, they will succeed.
Women need to take advantage of the fact that they are playing an increasing role in the economy. As their earning power grows, their investment portfolio should follow suit.
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Aaron Katsman is a licensed financial adviser in Israel and the United States who helps people with US investment accounts.