How much should I save for retirement? What is an IRA? Wait, there are multiple types of IRAs? Are they the same as a 401(k)?
Have you ever had these thoughts?
Understanding personal finance is frequently assumed to be an innate skill or perhaps one passed down from parents to children. Yet, when was the last time you explained a 401(k) to your kids? While it's likely parents encourage their children to save money, how to invest that money for retirement is not often on the weekly allowance household curriculum. For women, this lack of education is compounded by the findings in a recent study from investment firm T. Rowe Price that found parents have historically talked more to their sons about personal finance than their daughters. Unfortunately, this contributes to poorer financial literacy for women as compared to their male peers.
On the road to understanding and fully taking charge of their financial futures, women may face an even steeper hill to climb.
Throughout their lives women have lower average wages, lower lifetime earnings, and a greater disparity in retirement savings. These statistics coupled with a longer life expectancy and higher lifetime healthcare costs present a potential crisis for women later in life. On top of that, women are more likely than men to take time away from work to raise children or provide family caregiving. This means fewer years with income to save or with employer matches on retirement plans. It also means reduced Social Security checks. There is a prevailing lack of confidence women have in making personal finance, retirement, and investment decisions.
Personal finance is a daunting subject for everyone, and when it comes to the unique challenges women face, it can feel completely overwhelming. A 2017 Allianz "Woman, Money, and Power" study finds that women are increasingly taking the reins of their household finances, but many are still indecisive when also managing their career. Empowering women to understand their finances is critical to ensuring women have financial stability, flexibility, and independence to pursue the very heights of their careers.
These financial factors, while challenging, are not insurmountable. With proper financial planning, women can set their finances on track to overcome these hurdles. And it's never too late to start.
So, what can we, as women, do?
Start by asking questions. Don't know the difference among IRAs. Ask. Unsure how much to save for retirement? Ask. Seek out the advice and guidance of a reputable financial professional [PDF]. Research topics using reliable online and other resources and read up on subjects you find confusing or unclear.
Most importantly: be persistent! Set aside just ten minutes each week to research one financial question you have. Nobody is a financial expert overnight, so don't get discouraged. Work on building your understanding of personal finance a priority, even if it means starting with small, manageable bites.
There are no dumb questions here, only gateways to empowerment for you and your families. It is understandable that it can often be difficult to ask questions whose answers you assume you should know.
In an effort to continue the conversation, the Department of Banking and Securities will be launching a "Women and Finance" initiative to help address questions women have about their finances and empower women to plan for their retirement.
The goal of our "Women and Finance" initiative is to hear more about what information women want to know about personal finance. We also need your help! Following the focus group, the department will be creating an online survey where women across Pennsylvania can weigh in on what educational resources would benefit them and the questions they have. There will be more information available about the survey right here on PA Money Talks and our social media channels once it has been launched.
With the right tools, women can advance toward financial independence and help lead next generation of women on a path towards financial success.
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At the Pennsylvania Department of Banking and Securities, Julia Brinjac serves as Deputy Policy Director and Virginia Lucy serves as Deputy Communications Director.