At the first job Cena Pohl had where she was eligible to contribute to a 401(k) plan, she was called into the company HR office. The HR rep told Pohl, “Social Security won’t be there for you. I can’t give you advice on how to invest your money, but you’re allowed to take X amount, and I would suggest that you take the very maximum you can get, because you’re going to have to supplement what Social Security won’t give you.”
A typical young woman with little knowledge of investing would have no idea of how to allocate her 401(k) money. According to at least one planner, what most young women do under those circumstances is sign up for the most conservative investment option and leave their money there. Pohl was not just any young woman, however. She considered the choices and said, “I’d like to call my mother.” The HR rep said, “Cena, you’re a big girl now . . . you’ve got to break that umbilical cord.” Pohl replied, “Not when my mother’s a certified financial planner.” Avis Pohl, a planner in Scottsdale, Arizona, went over the figures with her daughter that night. “If you sign up for the amount she [the HR rep] recommends,” Avis Pohl recalls saying, “what are you going to [use to] feed your cats? You won’t have any money left at the end of the month.” They worked out a number that left Cena with enough to live on while still taking advantage of the 401(k) plan.
It turns out that young women, despite a generation of working mothers and numerous publications about how to handle personal finances, generally are in great need of financial guidance, according to most planners interviewed for this article. There are exceptions, of course, and some planners have female clients who know very well what they want to do with their money and how to do it. The old saws of women lacking the knowledge, courage, or willingness to deal with their finances apparently are still entirely too accurate.
In Cena Pohl’s case, after she shared her story with her co-workers she was inundated with questions from other young single women about where to put their 401(k) money. Cena’s answer was, “E-mail my Mom,” and “within the next three to six months, every young woman at that company e-mailed me,” Avis Pohl says. Avis now has a contingent of young women that she educates via e-mail about the realities of financial life.
Avis Pohl describes her work with these young women as being more like coaching than financial planning. These women are leaving home for the first time, she points out, and need advice on everything from finding a place to live to learning how to buy a car.
The Guy on the White Horse
Women who have no knowledge about finances seem to fall into two groups: those who simply were never educated about investing, budgets, and the other facts of financial life, and those who are still waiting for Mr. Right and don’t really want to learn solo about money if they don’t have to. Says Kathy Sachs, a Massachusetts planner, “My experience is that most of the women I deal with feel unprepared for this reality; we’ve never been trained to expect that we’ll have to do that.”
Sachs sees a division among her clients that she describes this way: “For me, the dividing line depends on whether they’ve gotten to the point of wondering whether they’re ever going to get married. A woman in her early thirties, she still thinks she’ll ‘grow up and get married and have kids’. It’s different planning. I think that’s the basic thing it comes down to: taking responsibility for ourselves. Part of what women have been programmed for is that somewhere, somehow, sometime, some man will come along and save them from having to do this.”
Kathie Barnes, a planner in Phoenix, Arizona, agrees that many women have a lot to learn about money. Barnes’ family works in banking, and she was exposed to finance from an early age, but when she was pursuing her doctorate in psychology she realized that women had many issues with money. So she changed tracks to educate women about money–”I didn’t have much money but did understand it”–and left the doctoral program to go into the financial arena, where she could better teach women what they needed to know about their finances. But she finds that the problem persists. “Even though they’re well educated and make a lot of money,” says Barnes, “they’re still deep in procrastination because of some voice saying, ‘I really don’t need to do something, because the shining armor guy will come along and sweep me off my feet. Either I don’t ever need to do anything, or I don’t need to start yet.’”
Avis Pohl’s young women don’t quite fit into this category, since, as she says, “they want and need this help. They realize there’s a lot they don’t know; they’re starting from scratch and they’re not pretending that they know anything. That’s why they get professional help.” But far too many women do put off learning anything about how to manage their money and plan for their futures. According to a survey just released by Prudential, even though 70% of those surveyed wanted to pass assets down to their children, only 14% had taken steps to do so. Of those surveyed, 78% thought it was important to have long-term care insurance, but only 5% of them had bought policies.
Bag Ladies in Training?
Whether it’s the cultural influences that still tell women they’ll be taken care of by men, despite a soaring divorce rate and the number of widows, or the discouragement of girls in school math classes and at home in money matters, the current generation of young women with high-paying jobs is not as well prepared for its financial future as it ought to be. This is an area where planners can do really substantial work, by educating their clients on the ins and outs of everything from budgeting (“I call it a spending plan,” says Sachs) to how to read a prospectus, when and how to buy property, and what sort of insurance is appropriate for their circumstances.
Barnes asks where else they can get the information. “Parents don’t do a good job, school does nothing, then they go to a seminar where they’ll sell you a life policy when you’re single and don’t need it anyway.” The Internet is a good resource for them, she says, but they need to have places to ask questions where they won’t feel intimidated or bored. Planners can provide that venue.
Women have a far more emotional approach to money. The fear of ending up on the streets is a very real one for far too many women, justified or not. Sachs says nearly all of her female clients are convinced that “someday, somehow, somewhere, we’ll end up on the street with our shopping bags. It’s real anxiety, and it’s not related to how much money they have or don’t have.” Pamela Krueger, a planner in Austin, Texas, tells of one client who “is in her late 30s. She has enough to retire. She doesn’t like the work she’s doing right this minute, but she can’t bring herself to cut the cord even though over and over again we have shown her that no matter what happens to the market she’s going to be okay.” Even though the client has five siblings, she worries, among other things, about the financial health of her parents as if she were the only one responsible for their future security.
Issues like this are what make women approach money differently from men. There are other differences, though. Even though it’s not a uniform phenomenon, Oak Brook, Illinois planner Nancy Coutu finds that her single female clients have a totally different mindset about how to approach their financial lives. “Male single clients are mega-financial,” she says. “They get out of college and are conditioned that the first thing you have to do is start saving money to buy that house. They’re being trained financially immediately, and have been told all their lives that they’re going to support a family. No one talked money to women. Dad doesn’t sit down with his little girl to talk about how to buy stocks as he would with his sons.” Males want to accumulate, Coutu says. Krueger says of her female single clients that, “generally speaking, they’re better savers and planners than young men. What I’ve seen is that young men see the sky as the limit and the good times will continue, and they’re always just gonna make more.”
While some young women will go to planners seeking the knowledge they know they lack, others will come for help. Says Barnes, “I have one client who makes $95,000 a year. She spends $200-$300 a month on hair and nails, bought a town house in an exclusive area that cost $260,000, and now it’s, ‘I have no money.’” A few wise women come to her, she says, who say, “Please guide me,” but more of the ones she gets come in with, “I’m in trouble; I need help.”
Other particular issues that single women clients face are the ticking of the biological clock, raising questions about when and how to have children. Also, actually finding Mr. Right raises questions on how to handle their assets before and after marriage.