Manisha Thakor, co-author of On My Own Two Feet: A Modern Girl's Guide to Personal Finance, wants you to be financially secure. Specifically, she wants all women, and not just the high net-worth ones catered to by the financial services industry, to have access to the same personal finance lessons that have helped her earn security at age 40. That’s why she developed a new online course, Money Rules, designed to help women get on top of their money. I recently spoke with Thakor about money myths and facts, and five money lessons every woman should learn. Excerpts:
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First let’s clear one thing up… are women worse with money than men?
Women absolutely, hands down, are not worse with money. That's an outdated, 1960s Mad Men era myth. The truth is, most people are bad with money—and not through any fault of their own. Thanks to product proliferation, the financial landscape has grown geometrically more complex than it was before. Yet financial education has not kept pace. Whether it's the alphabet soup of mortgages or the fact that there are more mutual funds than stocks traded on the New York Stock Exchange, there's just so much for women and men to wade through. It's as if we've all been thrown into this roadless jungle—and we've got no map or GPS.
So then why do you focus on women?
I choose to focus my work specifically on women for two simple reasons: First, it's even more important for us to get this money stuff right given the brutal financial headwinds we face that men currently do not—earning $0.78 on the male dollar and spending about 11 less years in the paid work force than men due to caring for children and elderly parents. Second, because we're the ones left holding the bag at the end of the day when poor household financial decision are made... simply because we live longer than men on average; they kick the can and we're stuck with the often paltry leftovers.
What is different for women when it comes to money?
The only piece of financial advice that I think differs for women than men is what the "age appropriate" asset allocation should be. Since women live longer, I think at any given age, women should have slightly more exposure to stocks than men. John Bogle is noted for his excellent rule of thumb saying the ideal percent of a portfolio to be in stocks is 100 minus your age. For women I suggest they use 110 minus their age. That's the only tactical difference in advice in my opinion.
However, it's clear to me that the root problem when it comes to financial literacy isn't lack of advice. Pretty much every financial pundit says the same thing: Save at least 15 percent, pay off your high-interest consumer debt, start investing early on, yadda yadda yadda. The right information is out there. It's just not being heard or acted upon by enough people of both genders.
Importantly, as demonstrated by the popularity of timeless books like Deborah Tannen’s You Just Don’t Understand, or John Gray’s Men Are From Mars, Women Are From Venus, men and women often learn, hear, and interpret the same information differently. Ergo, it make total sense to me that there may be some women who prefer to learn the same things about money as men, but in a different way.
Tell us five things women need to know.
Big picture: With this course I seek to present the 80 percent of basic personal finance information that is "the same" for everyone and then help students understand which kind of advisors (percent of asset under management, hourly fee-based, salaried firm-based, CPAs, etc.) are right to help them address the inevitable 20 percent of personal finance that is unique to them. My hope is that after taking this course students will be able to more effectively manage their money on their own and more confidently work with the advisor that is right for their situation.
[For more money-saving tips, visit the U.S. News Alpha Consumer blog.]
Here are five key takeaways: 1) How to prioritize saving versus paying off debt: This is a classic dilemma faced by both genders in an era where it's normal to be carrying huge student loan burdens into your late thirties and beyond.
2) How to create a powerful, keep-it-simple investment portfolio: Understanding the effect of fees, the importance of diversification, and the best types of accounts to utilize for short and long-term savings.
3) The types of financial advisors out there and how to find the right one for you, including what questions to ask, what fee ranges are normal, how to prepare for a meeting with an advisor.
4) How to handle money in the context of a romantic relationship: This is increasingly important as the percent of female breadwinners hits 40 percent... the money dynamic on many home fronts has shifted dramatically in the so-called “He-Session.”
5) Rules of thumb for how much home, car, or education you can comfortably afford: So much of the current financial crisis was caused by people not knowing how much was reasonable to spend on key life expenditures.
Kimberly Palmer is the author of the new book Generation Earn: The Young Professional’s Guide to Spending, Investing, and Giving Back.