Women Have Made Strides Yet Still Need to Catch Up

Women may have made up half the population since the days of Adam and Eve, but they were often ignored when it came to finances. Bankers ignored them. Brokers patronized them. Credit card issuers patiently told them to come back with a co-signer.

No longer.

Thanks to their increasing affluence and financial influence, women are a hot commodity, openly courted by every major brokerage firm and credit card company in America.

No one knows better about this change in attitude than Judi Davidson, a Los Angeles-area publicist. Ten years ago, the broker who was handling her individual retirement account refused to talk to her about how it was invested.

“He wanted to talk to my husband,” she grouses. “This was my money, and he never would talk to me.”

Now it’s Davidson who gets all the attention. In fact, one broker spent a year teaching her and her lunch group all about investing.

And Davidson isn’t the only woman to go from wallflower to belle of the financial ball in the last few years. Indeed, America’s biggest brokerage firms are wooing women with a host of free seminars across the nation.

“Women have always been considered consumers of detergent and toys, but with the rise of women in the work force, the rise of women-owned businesses and of their average net worth, women have become more formidable in finance,” says Loretta McCarthy, executive vice president and chief marketing officer at OppenheimerFunds. “Companies are beginning to see them as a target market.”

Now, partly because studies have shown that women won’t buy products unless they understand them--and women are far less likely than men to say they understand finance--investment companies are doing their level best to educate the gender.

“What we are trying to do is help women overcome the conditioning that investing is not comfortable for them,” says Jessica M. Bibliowicz, executive vice president of mutual funds and annuities at Smith Barney. “In the past, there was this mentality that finance was not feminine. We are trying to build the mentality that not only can they do it, it’s fun.”

It’s a welcome--and desperately needed--change.

But for all the strides women have made toward social and fiscal equality in recent decades, they are still behind the curve when it comes to finances. Worse still, the moment of truth tends to hit when women are most vulnerable--when they’re old, newly widowed or divorced.

Indeed, as a group, women are in financial trouble. Ninety percent of them are likely to handle their own finances at some point--yet statistics indicate that when they do, they end up poor.

Consider:

* By 1990, women made up 58% of the elderly population but accounted for 74% of the elderly poor, according to the Census Bureau.

* Despite the fact that women operate 30% of U.S. businesses and hold 45% of executive, administrative and management jobs, their marital status--not their work history--remains the biggest factor in determining their financial health at retirement.

A widow is four times more likely--and a single or divorced woman is five times more likely--to live in poverty than a married woman, according to the National Center for Women and Retirement Research in Southampton, N.Y.

* In the first year after a divorce, a woman’s standard of living drops 73%, while a man’s improves 42%, on average.

* Women are half as likely as men to have an employer-provided pension, and those who do have them get half as much, on average, as men, according to a recent study by the Women’s Research and Education Institute.

Moreover, women place their needs second when it comes to saving. Whereas men say their primary financial goal is to save for retirement, for women it’s to save for the kids’ college education, according to the Equitable Nest Egg survey.

When saving for themselves, women start late, save less and invest in conservative, low-yielding investments. Since women also live an average of seven years longer than men--and thus need more money than men to live comfortably when they’re old--this combination spells disaster.

But these are problems that can be solved--at least for those starting their careers now, or anyone who is persistent and willing to work at it.

There are four simple rules to start with that can help women--and plenty of men in similar situations--vastly improve their long-term financial picture:

1. Know the pension rules.

“Make sure you’ve got a pension, and make sure you know the rules,” says says Karen Ferguson, director of the Pension Rights Center in Washington and co-author of “The Pension Book.”

“It’s critical. Pensions are often the deciding factor in whether women will make it or not.”

Women work an average of 4.8 years in a single job. Most company pension plans “vest”--become yours--after five years. That’s just four months more.

And you recapture years of credit if you return to the company within five years.

2. Do your homework.

In school you worked on the “three Rs.” In finance, it’s the “two Bs”--budget and balance sheet. The good news is that’s not as bad as it sounds.

To do a budget, all you have to do is sit down with a check register and figure out how much money is coming in each month and how much is going out. While you’re at it, consider how much of that money is spent on necessary things that can’t be cut back on and how much is luxury. Retirement savings ought to be in the necessary category.

The second step is the balance sheet, which is simply a listing of the approximate value of the things you own--such as your house, savings account, cash value of life insurance and the vested amount of your pension--then you subtract what you owe.

“I can’t tell you how many times I’ve dealt with widows who, until their husbands died, didn’t know whether they were worth 30 cents or $30 million,” says Vickie Handlin Suelzle, tax manager at the Seattle accounting firm of Moss Adams.

3. Establish credit.

Right now, women are being offered credit cards at a breakneck pace. If you don’t have credit in your own name, consider accepting one no-fee, low-rate card. Use it occasionally. Pay it off promptly.

Done right, having your own credit card doesn’t cost a cent. It simply allows you to establish a credit history, in case you someday need to borrow money on your own.

4. Be a little selfish.

Here’s a telling statistic: Between home and the office, the typical working woman puts in 75 hours of work per week, compared with 62 hours for the average man, according to a survey by Temple University School of Business and Management.

For many working women, the most precious luxury is time alone. And that’s precisely what you need to invest wisely. Even the simplest investments take some time to investigate and establish. To invest well--matching your assets and feelings about risk with appropriate specific investments--can easily take several hours a week.

“How many women do you know say, ‘I can’t make a play date for the kids because I’m looking at financial statements for some stocks I want to own’?” asks Cindy Housell, staff attorney at the Pension Rights Center. “Women are not too stupid to invest well. They just don’t take the time.”

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Warnings for Women

Here are some suggestions for women who are just getting their feet wet in finances:

1. Don’t move too fast.

Con artists and unscrupulous salespeople read the obituaries and prey on widows, who often come into lump-sum payments either from life insurance proceeds or pension distributions. The older and more traditional the marriage, the more likely the widow will feel incapable of handling the money alone, says Denise Voigt Crawford, Texas securities commissioner.

“We had a case in Texas where the widow was actually approached at her husband’s funeral,” Crawford says.

The common pitch: “I can help you.” When you say, “I’m not ready to think about investing yet,” the reply boils down to: “I understand, but this opportunity won’t wait.”

In reality, good investment opportunities are like flights to New York. If you miss one, you can easily catch another.

So if you find yourself with a big chunk of cash and no idea what to do with it, stick it in a bank and procrastinate.

“It is much more difficult to be ripped off if you have a fundamental understanding of the concepts of risk and reward,” Crawford says. “Take the time to get educated.”

2. Don’t mix economics and emotion.

Violet Woodhouse, an Anaheim-based attorney and financial planner, says women who are getting a divorce consistently make the same mistake. They demand the house. Then, to make sure they get it, they give up the brokerage account, the better car, not to mention all claims to the pension.

Why so set on real estate? In the middle of a traumatic upheaval, the house seems safe and familiar. Women also frequently argue that it’s too unsettling for the children to handle the divorce and a move at the same time.

However, when you get the house, you’re usually also obligating yourself to the monthly payment.

Moreover, the kids eventually move out. You may be left battling to make the mortgage on a house that’s suddenly too big and filled with painful memories.

Sometimes the biggest problem is the huge tax bite on a capital gain when the house is sold--something you could have minimized by selling the house at the time of the divorce and splitting the gain with your ex-husband.

3. Don’t avoid all risk.

Don’t fear the stock market. In fact, if you have a longtime horizon and a diversified stock portfolio, the market risks are fairly modest.

Ibbotson Associates, a Chicago-based market research firm, studied average annual returns from 1926 to the present. In 61 10-year periods studied, there were only two in which investors suffered losses.

Certainly, along the way the stock market has experienced some stomach-churning declines. There are certainly safer investments. But avoiding the risk of the stock market is the financial equivalent of never learning to cross the street.

4. Don’t hesitate to get help.

The current bumper crop of women-and-money seminars give women the opportunity to learn a tremendous amount about investing before they risk a dime, says Hope Feinglass, director of tax and financial planning at Money Minds in Villa Park, Ill.

But don’t fool yourself into thinking brokerage firms are public service corporations. People who attend free seminars are usually asked to register. And eventually they’re usually contacted by a broker who would like to sell them a financial product.

There’s nothing wrong with that. In fact, with the knowledge gained from a good seminar, you might be ready to invest. And a good broker can take you by the hand and help you negotiate the risks of Wall Street.

But if your broker makes investing sound complicated or mysterious, if he or she fails to explain any recommendation thoroughly enough for you to understand, if the opportunities seem too good to be true, or if you simply don’t feel confident enough about your ability to evaluate investments, go out and hire a financial advisor, Feinglass suggests.