The Fourth of July is all about celebrating our freedom and it’s, therefore, a good time to revive conversations on our financial freedom — particularly for women. Unfortunately, women may discover that they’re not as financially independent or free as they think. How can one be financially independent when the foundation of their financial plan is reliant upon others, after all?
Merrill Edge’s Spring 2018 Report, a nationwide survey delivered semi-annually, takes an in-depth look at the financial concerns and priorities of Americans in US households with investable assets ranging from $50,000 to $250,000. Of those Americans surveyed, 33 percent said their financial stability is dependent on receiving an inheritance. That’s one in three Americans who say that their financial stability is dependent on someone else’s money passing down to them.
“We never seen such a strong reliance on receiving an inheritance,” writes head Aron Levine, head of Merrill Edge. “With shifting priorities and growing lifespans, Americans are finding new ways to ensure their financial stability and, as such, are increasingly looking to others. While it’s great to see investors thinking ahead, the key to financial freedom is outlining and following an action plan for short- and long-term goals beyond an inheritance—which may or may not ever come.”
Financial dependence is exacerbated for today’s youngest generation (Gen Zers, born after 1995) and women, who don't achieve financial wellness the same way men do. Sixty-three percent of Gen Zers say they need an inheritance to achieve financial stability, according to Merrill Edge, and 44 percent of women worry that they’ll run out of money by age 80 despite most (64 percent) hoping to live to 100, according to Merrill Lynch’s Women & Financial Wellness: Beyond the Bottom Line report.
In partnership with Age Wage, Merrill Lynch’s report surveyed 3,707 respondents including 2,638 women. The results suggest that 70 percent of women believe that men and women have fundamentally different financial paths in life regarding their concerns and opportunities. The fact is that women live, on average, five years longer than men — 81 percent of centenarians are women, few of whom are financially prepared for the long of a life.
How can women stem the tides? They can make smarter investments. According to the report, 41 percent of women wish they’d invested more of their money, perhaps because key stages of life like parenting and caregiving cause them to take time off from their jobs far more than men. Financially, that translates to a cumulative lifetime earnings gap between men and women at retirement age of $1,055,000. And because women live longer, they end up paying an additional $195,000 on average for long-term care in later years.
That said, while women’s confidence in other financial matters is equal to or greater than men’s, the same can’t necessarily be said for investing. When it comes to managing investments, only about half (52 percent) of women say they’re confident, compared to 68 percent of men.
Specifically, 77 percent of women are more concerned with what money can do for their families. But, for those who do invest wisely, their financial confidence soars — 77 percent of those who’d invested said they felt like they were able to accumulate enough money to support themselves throughout their entire lives.
Here are three tips from Merrill Edge’s report on investing:
1. Invest with a Purpose
Seventy-eight percent of Americans report putting others’ concerns before their own, which may be why social responsibility is so important to them. When making investment decisions, 87 percent chose companies that pay men and women equally, 85 percent choose those with diverse leadership, 82 percent chose companies that demonstrate a commitment to environmental sustainability, 78 percent consider whether a company provides three or more months of family leave, 62 percent invest in companies that share the same faith, and 61 percent invest in companies that support the LGBTQ community.
2. Prioritize a Profit
While being socially conscious is important, prioritizing a profit is the key idea to saving enough money. Twenty-two percent of Americans see the stock market as opportunistic, and more than half (57 percent) are likely to invest in a company that promises a profit, regardless of its sector. In fact, 60 percent say they’re more like to invest in a profitable company whose values they disagree with, whereas 40 percent are more likely to invest in a struggling company whose values they agree with — profits are important.
3. Ask for Help
Despite 75 percent of Americans taking a “do-it-myself” approach to their finances, the fact that one in three say their financial stability is dependent on an inheritance means that they could use some help. Don’t shy away from speaking with experts especially if you fear that you lack the know-how to do it yourself or don’t have confidence in your investment decisions. Financial advisors are here for a reason.
For more, check out Fairygodboss' post on investment for beginners.
AnnaMarie Houlis is a multimedia journalist and an adventure aficionado with a keen cultural curiosity and an affinity for solo travel. She's an editor by day and a travel blogger at HerReport.org by night.