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Women's Financial Responsibilities Outpace Their Knowledge

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It took a divorce for Kim Knox to start learning about investing. Though not her own.

In 2009, after her husband's parents split, Knox's mother-in-law turned to her certified public accountant son, Chris Knox, for help figuring out how to manage her investments. Kim would sit with her while Chris talked through spreadsheets of his mother's assets.

While Kim has taken care of the family's day-to-day expenses since the couple married in 2002, Chris has always managed their investments, she says.

"I knew nothing about it. I was just so ignorant about it that it made me scared," the 33-year-old says.

While Chris still handles their investments, Kim says the decision-making process is more collaborative, and she feels much more comfortable and confident in how their money is allocated. She says she can't wait to be able to teach the couple's three young children — two girls and a boy — what she has learned "so this vernacular is familiar to them. I want them to be able to do this without the anxiety that I felt."

Studies show that the majority of American women share Kim Knox's previous anxiety about investing. And it's a sentiment that needs to change, given the increasing role women play in society, as professionals, as breadwinners and as the dominant gender in old age, financial planning professionals say.


Women are gaining financial independence to an unprecedented degree — they now make up the majority of college graduates, are nearly half of the labor force and are becoming the primary earners in many households. Yet most remain uneasy or uninvolved when it comes to talking about and managing money.

The repercussions of their lack of knowledge are ones everyone, not just women, will have to bear the burden of, personal finance experts say.

"If we find ourselves in a position 15 years from now where the husbands start to pass away and the wife doesn't know what to do in terms of managing money, there's going to be a lot of bad decisions made, a lot of economic waste and a lot of scared people," says Justin Reckers, a certified financial planner who runs wealth management and divorce management practices in San Diego.

The majority of women (single, married or with a partner) are the primary breadwinners in their homes, according to a 2012 study of 1,410 women and 604 men by Prudential. Among women who are married or living with a partner, 22 percent report making more money than their husband or partner, the study shows.

Their earning potential has also grown — as of 2008, wives contributed to 36 percent of family earnings, vs. about 27 percent in 1970, according to a 2011 survey of more than 4,500 households by financial services research firm Hearts & Wallets.

A high divorce rate, in addition to women outliving men, means that 80 percent to 90 percent of women will be solely responsible for their finances at some point in their lives, says Kim Dellarocca, director of global segment marketing and practice management for Pershing, a business solutions firm for the financial services industry.


The problem? Women's financial responsibilities are growing faster than their knowledge, says Joan Cleveland, senior vice president of business development for individual life insurance at Prudential.

Many studies in the last decade have shown that women consistently feel less confident than men in their understanding of financial products, their ability to make financial decisions and their perception of their current economic standing, the Prudential and Hearts & Wallets studies among them.

Traditional gender roles

Women are 42 percent more likely than men to be concerned about having enough money for retirement; 49 percent say they are "very inexperienced" with investing vs. 34 percent of men and 42 percent say they are "very uncomfortable" taking on investment risk compared with 28 percent of men, the 2012 Hearts & Wallets survey of 5,460 households shows.

"There is a big general problem about women feeling insecure about their finances, not knowing where to get help, being too conservative and then facing retirement alone and underfunded," says Peg Downey, a CFP who co-founded a financial education and consulting firm aimed at helping financial advisers address women.

Some of it can be attributed to falling into traditional gender roles, especially among Baby Boomers, Reckers says.

"They're still in the generation where it's more accepted for a man to drive those decisions," he says. "They lack the knowledge because a lot of them haven't needed to do it in the past."

But it's also because of the financial services industry, which still overwhelmingly caters to men in the way it presents and discusses information and products, Downey and other financial experts say.

"It's a male-dominated field — the vocabulary, the way we measure it, present it. It's a language that has been always spoken by men to men," says Eleanor Blayney, co-founder of the financial education firm with Downey and a consumer advocate for the CFP Board of Standards. "It misses some fundamental truths about women and the way they think and make decisions."

Some of those include the fact that women like to learn in groups and consult with their peers more than men do, Blayney says.

Women also find jargon more unwelcoming and tend to tune out when things are explained to them from a performance perspective, Reckers says.

"When I speak to women, it's a longer conversation," he says. "When I sit down with a couple or even a single man, our conversations are driven by investment performance and numbers. When I'm speaking to a woman, it's more often about comfort and security."

Suzanne Meredith, who started working with Reckers in 2007, says she appreciates his more personal approach.

"He's more detail-oriented," the 56-year-old says. "He finds out what my lifestyle is like — everything from my work life to my social life to my kids."

Those kinds of details are important to recognize for women, as they often shape their financial priorities, Downey says.

The 2012 Hearts & Wallets study shows that having dependents increases financial stress for women more than it does for men. Of women with children, 39 percent reported having high or moderate anxiety about their financial situation in retirement vs. 29 percent of men with children.

"Women tend to be bigger financial enablers," says Teresa Dentino, CEO of The Financial 411, a women's financial education consulting firm. "They're going to look to take care of their kids before they even take care of their own retirement needs."

When she got divorced in 2005, Meredith says, she had been out of the workforce for 20 years, but worrying about saving for retirement alone was not a primary concern.

"I had so many immediate fires to put out — my kids, (paying for) their college," she says. "There's all these day-to-day issues that come before you go online and start looking up Social Security."

Some financial professionals are starting to work with women in a way they'll be more receptive to and are pushing traditional financial institutions to do the same.

"(Financial institutions) are finally saying, 'Oh, my gosh, women do have a different approach,' " Dentino says. "They're trying to figure out what that is and nobody really has their arms around it."

Dentino works with several financial institutions to help them understand how to work better with women.

She says she explains to companies that it's important to make financial information relatable to women's lives and families.

"Presentation mechanics can make a big difference in how you get their attention and engage them," she says. "I work with (women) in exercises that involve them."

Pershing released a guidebook in March outlining how catering to women is important to the future success of financial planning companies and advisers.

It argues that financial advisers need to drop gender stereotypes and assumptions that women can't or don't want to understand investing, and need to take the time to develop deeper relationships with female clients.

"Financial advisers have to pay attention, because women are 51% of the population and the economic power that they wield is tremendous," Dellarocca says.

She says financial advisers need to become better listeners, be more empathetic and focus on financial education when working with women.

Clients have responded well to Pershing's guidebook in the months since it was published, Dellarocca says. At industry conferences, sessions that Pershing hosts on how to work with women are often completely full, she says.

'Just start taking that first step'

But women also need to get over their perceived inability to grasp financial concepts, financial professionals say.

"If women just start taking that first step to do something, that's going to put them on the right path," says Cleveland of Prudential. "When you start, the fear and mystique go away."

Kim Knox says that once she started learning alongside her mother-in-law, she realized she could handle investing and asset management.

"It was a good learning experience for me and very meaningful, because I saw her land on her feet and understand these complicated financial things," Knox, of Indianapolis, says. "Deep down inside, it was like, 'It can be done.' "

But Knox admits that she never would have gained these skills if her mother-in-law hadn't been forced to.

"It makes me frustrated at myself," she says. "This is my retirement, too. It's just so silly that I felt so intimidated about something that is something people can learn."

And if women don't learn how to invest and plan for retirement, the consequences will be too great to handle, financial professionals say.

"Society is going to have a vast majority of its population that is impoverished, that hasn't provided financially for themselves," Downey says. "We don't have the money to take care of a population like that."

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