We’ve all heard it before: Stop buying coffee, stop eating avocado toast — you’re wasting your money. These common financial tropes can lead to feelings of confusion, guilt and shame, especially for women and younger people.
Millions of women around the country face financial anxiety every day — and more so than their male counterparts, according to 2019 data from Edison Research. The study found that women have a higher economic anxiety score than men, and the median score for women of color is 36% higher than all men.
When it comes to women and money, there’s a lot of not-so-sound advice floating around in the personal finance universe. Here’s what you need to know to bust five common myths about women and money.
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1. Women are bad with money.
There’s a pervasive myth that women are worse at math and therefore are bad with money, experts say. But that’s simply not the case when you look at women’s success rates around saving and investing. According to a study from Fidelity, in proportion to their account balances, women saved more in non-workplace accounts like IRAs and brokerages, and women perform slightly better than their male counterparts in their investments.
“Around personal finance there's a lot of jargon, and I don't think enough people take the time to understand it. If there's a script that men just regurgitate, more often than not women just feel confused by it,” said Shannon McLay, founder and CEO of the Financial Gym, a personal financial services company.
Another thing to consider is who handles the finances in your family, especially if financial decisions default to your partner. “It's just really important to be an active decision maker,” explained Lorna Kapusta, head of women and investing at Fidelity. “You need to be able to know what you owe, what you own, and what your goals are — and make sure that your money is being invested.”
2. Saving is enough.
Savings is an essential part of your financial safety net, especially for goals like retirement and your emergency fund. Yet growing your money is an important part of building wealth, which includes investing. “What you think with money is all I need to do is save, and if I’m a good saver, that’s enough,” Kapusta said. Kapusta acknowledges that women can be more risk averse than men, and explained, “there are a lot of other options to invest that may not be as risky based on the duration of how long you're going to put it away. That still can help your money grow more than sitting in the bank.”
Prioritizing shorter term and individualized goals is important, too, according to McLay. “Thinking about working to save for retirement in 50 years is just not motivating and so it's really hard to kind of get focused on that path if you're not connected to it,” McLay said.
3. Women don’t have money to save.
During this crisis, having money to pay the bills — let alone save — can seem daunting, but McLay doesn’t expect her clients to be able to stockpile hundreds of dollars at the drop of a hat. McLay encourages small, consistent and actionable steps. “There's a lot of headwinds and big numbers that can almost paralyze you, but you just start with smaller things like what can I accomplish this week,” she explained. “How many no-spend days can I do this week or how much can I save?”
4. Women can’t invest because they don’t know enough about it or don’t have enough money.
Kapusta explained that a lack of knowledge is a roadblock for women to start investing or get financial advice, but that women can be very goal-oriented with their investing, which helps them long term.
“[Women are] thinking about what I want, when I want it and they really tried to stick with reaching that, where oftentimes men are focused on getting that big return or beating the benchmark,” Kapusta said. “You don't need to have tons of money to get help [with your finances or investing].”
5. Buying lattes is what’s keeping women from their financial goals.
The infamous advice— to just stop buying that one little luxury — has taken hold in personal finance advice. But that doesn’t mean you need to quit your Starbucks habit cold turkey if it truly brings you joy. “I am more a fan of helping you to organize your paycheck so that you can — if your delight is your latte, go have your latte, understand how that impacts your money coming in, but have an organization structure so that you know and can kind of build it into what you're doing [financially].”
Not all financial goals necessarily need to be rooted in utilitarian or practical needs, said McLay. “You can have goals that motivate you. We have clients with goals to buy a Louis Vuitton bag. It’s not a bad thing.”