“Today, women control a third of total US household financial assets—more than $10 trillion. An unprecedented amount of assets will shift into the hands of US women over the next three to five years, representing a $30 trillion opportunity by the end of the decade. A potential wealth transfer of such magnitude that it approaches the annual GDP of the United States.” (1)
One of the greatest transfers of wealth is happening right before our eyes. There are a combination of factors contributing to this but primarily due to the Baby Boomer generation. Much of the wealth from this generation was created by men and over the past 10 years we have been seeing the transfer happen slowly as the baby boomers pass their wealth on to their spouses, children and next of kin.
This is both a tremendous opportunity and responsibility for women in the coming years.
This is an opportunity for women, who are not already taking this position, to take a leadership role in the management of their family assets and continuing on the family legacy.
The one thing that keeps me up and night though, as I have been witness to this before, is the passing of wealth without being included in the process or conversation prior to the transfer.
How Can We Best Prepare for the Transfer of Wealth
Open Dialogue
It is of the utmost importance to be having healthy conversations prior to transferring wealth – whether to your spouse, children, whomever. Why? So that you can discuss money matters that are important to you. You can create a legacy around what you want your family money to accomplish when you’re gone.
And perhaps most importantly, so that there is a connection between receiving money and the person(s) in which it was passed down from. This creates a sense of accountability, appreciation and respect for a sum of money that represented the hard work and dedication of generation(s) before.
Insight and Inclusiveness With Advisors
The last thing families need after the passing of a loved one is to be bombarded with financial responsibility when they had never once been involved. At that point they are then solely leaning on the advisors to point them in the right direction without any indication or understanding of whether or not this was the family plan after all.
Creating transparency and including your family in the conversations with advisors will not only help them prepare but will also give everyone peace of mind around ensuring the family assets are being properly managed and taken care of in accordance with the family wishes and values.
Financial Education
I encourage spouses to be meeting with their financial advisors together – bridging the gap of communication for those spouses who may not have taken an active role in the finances in the past.
The next generation of investors and the recipients of wealth should be educating themselves on all things money management – investing, debt, tax, etc. With the transfer of assets, will come a transfer of responsibility.
One of the best ways that we can prepare women both young and younger 🙂 for this great wealth transfer is through education around personal finance & investing.
Women & Investing
Fidelity just came out with a study called, Fidelity Investments’ 2021 Women and Investing. Some of the statistics are surprising, others not so much. Here were a few of my favorites from the study as it relates to women and investing:
- 67% of women are now investing outside their retirement accounts, a 50% jump from 2018. (2) That’s a tremendous change over 3 short years!!
- On average, women outperformed their male counterparts by 40 basis points or 0.4% (2)
- 64% of women would like to be more active in their finances, including investment decisions (2)
I am genuinely thrilled to see the change in women investors over the past 10 years. Women are pursuing higher education at rates greater than men, continuing to break glass ceilings to enhance their earnings potential and are living longer than men. Women are a force in the economic landscape.
On average, women outperform their male counterparts
What that statistic really means is that women are willing to check their emotions at the door and let their investments run their course by utilizing a buy and hold strategy. Whereas men typically (this is not based off of an article, I have experienced this first hand) men believe they know better.
I say this with love gentleman, but many men believe they have some additional insight into the marketplace that will serve them better than to stick with their financial plan. They buy and sell more frequently often times resulting in a greater tax bill and stunted performance.
With that said, women’s investments tend to outperform men’s investment portfolios due to their consistency, patience and lack of emotional response when volatility arises.
But there is still a lot of room for growth for women investors
Despite these positive changes we are seeing in the investing landscape for women, there are still a few statistics that I continue to read over the years that are the exact reason I started FinPowered Female to begin with. See below:
- Only 33% of women feel confident in their ability to make investment decisions (2)
- Women hold 71% of their assets in cash (aka not investing to build wealth), vs 60% held by men (3)
- Only 19% of women feel confident in selecting investments that align with their goals
- It is said that 31% of women feel confident planning for financial needs in retirement.
So what we have here is the greatest wealth transfer to women in history occurring as we speak. More women will be controlling money and wealth for their families than ever before. Women want to understand and learn more about investing and making smart informed financial decisions.
But there is a lack of confidence in their ability to make these impactful financial decisions and thus many women decide to leave their assets in cash as opposed to investing.
Money is not power. It’s potential power.
If not navigated appropriately, money will serve an insignificant purpose, have minimal impact and diminish quickly if not properly taken care of.
It is estimated that 70% of wealthy families will lose their wealth by the second generation and 90% will lose it by the third. (4)
I started FinPowered Female because I want EVERYONE to understand that they have everything they need to create wealth for themselves or to make the most out of the wealth they have. You have the power to make informed, smart financial choices that will benefit you for years to come.
It’s not about being “better” than men or having more money than men
I simply just want women to feel more confident as it relates to money, personal finance and investing and I plan to do everything in my power to see that change.
I want women to understand that they are FULLY capable of making a lot of money. They are FULLY capable of investing and creating wealth. Men are not born with any additional insight or competitive edge as it relates to money.
I’ve said this before and I will say it again, understanding personal finance and investing is NOT difficult.
There is a lot to know as it relates to being a successful steward of your wealth, but like anything, it can be learned!
Let’s educate ourselves on all things money to create the wealth and live the life we desire.
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(3) https://www.ellevest.com/magazine/disrupt-money/stats-about-women-money
