When it comes to investing, having money doesn’t buy women confidence in their ability to choose their investments wisely — or choose them at all.
The Wells Fargo Affluent Women Retirement Survey polled 600 women with a median household income of $145,000 and $455,000 in investable assets. According to the survey, two out every five affluent women earn the same or more than their spouse. But two out of five also don’t think they’re capable of making smart investment decisions.
The Wells Fargo survey also revealed that fewer than 40% of women have a written retirement plan, even though most said they would probably need $1.5 million to retire on by the age of 66.
Nevertheless, most women, 73% by some industry estimates, are already the chief financial officers at home. They buy the groceries, manage the checking account, pay the bills and balance the budget.
Just because women work full time and run the household doesn’t mean they feel competent — or confident — enough to manage their investment assets, according to a study conducted by Prudential in 2012-2013.
In fact, the Prudential study revealed some shocking numbers about women:
- Only 23% felt savvy enough to make important financial decisions
- Just under half said they would take an investment risk for a bigger payout
- 59%, said they would only invest in “guaranteed” financial products
- 70% identified themselves as savers, not as investors
Not surprisingly, lack of investing confidence among women, even affluent women, affects their investment opportunities and, in turn, the eventual size of their retirement nest egg. Women have, by and large, perfected the art of saving money, just not the art of growing it.
Amassing a stash of cash to start a rainy-day fund is a good idea, but mere savings won’t support you in retirement. If your savings account is earning just 1% annually, it’s not keeping up with inflation, which averages just over 3% annually.
Fortunately, lack of confidence isn’t a permanent condition. Improving your financial literacy will not only boost your confidence, it will also increase your knowledge of the whys and hows of investing.
As Benjamin Franklin said, “An investment in knowledge pays the best interest.” Here are a few things you can do to get started:
- Lay out your financial goals. How much do you want to save? How much do you want to have for retirement? How comfortable do you want your retirement to be? Your financial goals can change with time, maturity and personal situations, so review your list carefully.
- Educate yourself. Financial literacy really is the best tool for overcoming investment anxiety, so make it a priority. Attend an investment seminar sponsored by a professional membership or industry organization. Take a workshop or a course on investing at a local community college. Join an investment club, or start one with some of your friends. Read a well-regarded investment book, such as The Elements of Investing or A Random Walk Down Wall Street. The bottom line here is that an educated investor is more likely to make smarter decisions.
- Consider working with a professional. According to one study, a staggering 70% of women claim to want to work with an investment advisor but only 20% follow through with it. The right investment advisor will work with you toward your financial goals — and educate you along the way.