Fighting Financial Phobias
Fighting Financial Phobias

Fighting Financial Phobias





Fighting Financial Phobias

Empowering women to own their money.

Destitute and on the streets.

It’s a fear held by one third of women with household incomes of $200,000 or more, according to a 2013 Allianz study.

First coined in the 1970s as the Bag Lady Syndrome, this phobia points to the anxiety wrapped up in being financially unprepared for the future. Lily Tomlin, Gloria Steinem, Shirley MacLaine, and Katie Couric—successful women who have spent a large portion of their lives accruing wealth singlehandedly—have all admitted to being haunted by the idea.i

Why are women disproportionately worried about their financial futures?

Statistics point to some obvious answers. On average, women live longer than men and get paid less for the same job, so they have less money to put aside. Many also withdraw from the workforce for a period of time to raise a family, leaving them with less time to contribute to a retirement account. Plus, there’s divorce and widowhood—two life events that can sideline women financially.

But statistics also reveal some surprises.

Women comprise half the U.S. workforce and control more than 50 percent of the country’s wealth, facts even more remarkable considering that women earn 78 cents for every dollar that a man earns. Yet women are vastly underrepresented in the finance sector and tend to let men make family financial decisions.

A Morningstar study found that less than 10 percent of all U.S. fund managers are women; women exclusively run about 2 percent of the industry’s assets and open-end funds. And a Fidelity Investments study found that when couples interact with a financial advisor, men are 58 percent more likely than women to be the primary contact.ii

When it comes to money, some women tend to be financially passive. The reasons for this vary. Some lack an understanding of the technical aspects of investing and feel intimidated. Others simply have no interest in the topic, which leads to avoidance. It is common to see older generations fall into the pattern of the husband controlling the finances while the wife is left out of the decision making process. But more often than not, women simply look at investing differently than men.

Years ago I advised a couple who typified these stereotypes. As we discussed their finances, the husband wanted to discuss in-depth investment concepts whereas the wife was interested in financial security—specifically, if they have enough to live on and what to do if something happened to her husband. For her the big picture and the sense of well-being were more important, while the husband was far more interested in being engaged in the investing process.

“Women tend to doubt their own decision-making,” writes Suzanne Miller in a Forbes column about female reluctance to deal with dollars and cents. “Low confidence and fear can translate into avoidance that results in not taking charge of one’s financial future.”

Earn it. Own it.

Why exactly do women shy away from owning the wealth they have worked hard to earn? Society may be largely to blame. Women are accustomed to conceding to men in money matters as, traditionally, management of wealth has been a man’s role.

Before the feminist revolution, men held the family purse strings. As such, it became the social norm to communicate economic wisdom and advice to sons but not to daughters.iii According to T. Rowe Price’s 2014 Parents, Kids & Money Survey, parents treat their sons and daughters differently when it comes to money. Fifty-eight percent of boys surveyed said that their parents talk to them about setting financial goals, while only 50 percent of girls said the same. At least in part, parents withheld wisdom because women were relegated as the primary caregivers—vital work, to be sure, but not associated with monetary compensation.

Children internalize the attitudes associated with these roles. In a Psychology Today article, Olivia Mellan and Karina Piskadlo describe a study that asked high school students how good they were with math and money. “Pretty good,” the boys said. “Not very good,” the girls said. In fact, both knew the same amount about math and money, but their confidence levels were vastly different. Boys carry that confidence into adulthood. Men tend to attribute investment success to skill while prosperous women are more likely to credit advisers and good luck.

The Male/Female Difference

Men traditionally associate money with power, while women relate to power in complex, often ambivalent ways. Money may be tied to a man’s ego, and serves as a scorecard for how well he competes.

A history of male dominance reinforces what biology has predetermined: a gene on their Y chromosome produces testosterone while suppressing female development. The male brain has a bulging amygdala—the brain’s center of fear and violence—that is densely dotted with testosterone receptors, the catalysts for competitive and high risk behavior. Without this male adaptation, women are naturally wired to be more cooperative than competitive. This manifests in their relationship with money. They are not as interested in amassing it as they are in using it to care for their families.

The male and female chromosomes may also account for the different approaches to investing. According to Kerry Hannon, a retirement and personal finance expert based in Washington, women don’t want it to be a numbers game. “We care about the returns and so forth. But this is not a competition. Men typically slide into that mindset a bit more," she writes. "Most women aren’t generally willing to bet the farm. We don’t need the highest return, or the next hot investment. We want a steady, solid return over time. It’s an organic, big picture scenario that we’re interested in pursuing. We are afraid of losing it all, so we want to keep control and safety at a gut level.”iv

I’ve seen this repeatedly played out as I advise couples. Say a couple receives an inheritance. Typically, the husband and wife have different ideas of what to do with their good fortune. Men tend to be more risk tolerant while women tend to be more conservative. The challenge is to engage both male and female to work through a solution.

Why Engage?

Playing it safe when you’re well-informed isn’t wrong. But excessive caution can be detrimental when it’s a result of fear, lack of knowledge or interest. Engagement begins with a subtle mental shift that acknowledges that financial security is rooted in financial empowerment. With education, a woman can engage more with her money.

This is especially important as women are heading more households, making inroads into the C-suite, and increasing their presence on the Forbes list of billionaires.

The increasing power and public authority of women are the result of social forces and technological advancements that gradually have been changing traditional roles and values. New generations are not beholden to their predecessors. Millennials, who are now establishing themselves in the workforce, tend not to hold traditional attitudes towards work and money. Women are getting married later, or are living with partners, and are taking ownership of their money while keeping their finances separate.

To be sure, the attitudes of women toward money are beginning to catch up with the times.

As they are increasingly motivated, women are taking steps to control their money and its rewards. Typically, they look for a partnership with financial advisors that focuses more on meaning and values.

Recognizing this shift, financial institutions and advisors now offer more resources and tailor their products to reflect what women want. For instance, financial advisors sometimes arrange themed events for women so they can enjoy an activity together, followed by a lesson and a discussion on a financial topic. The events focus on building relationships rather than conducting a financial transaction. This model fits the typical female mindset. Women like to think through investments together, learning as much as they can about a strategy from each other. They want to be able to ask questions and not feel intimidated. They crave knowledge for things they don’t understand, not so much because they want to master it, but because they want to apply that knowledge to things they care about. A woman’s bottom line is often deeper than a man’s.

And her life line is longer. Research by Boston College’s Center on Wealth and Philanthropy found that because women tend to outlive their spouses, overall they will be managing the majority of the $41 trillion in wealth that will pass to the next generation by 2052.

"Men are more about fixing things and getting to the bottom line. A woman doesn’t necessarily want to get to the bottom line right away," said Kathleen Rehl, a financial planner and the author of "Moving Forward on Your Own: A Financial Guidebook for Widows." Sometimes, she said, a recently widowed woman needs to process her grief and dig through paperwork that has been let go before she can make a plan for the future, and an advisor can help build the relationship by assisting with both.

Planning for widowhood is certainly a compelling reason for women not to take a back seat to men when it comes to finances, but it can also illustrate how all women should approach their money—with a realistic appraisal of life’s opportunities and its inevitable realities. This is relatively new territory for most women, in a domain traditionally ruled by men. But financial institutions have become more attuned to what women want from their money, and are making it easier for them to get it. As the balance shifts, women are increasingly taking advantage of the opportunities.

The more women empower themselves and become engaged with their money, the more content they will be. Ownership and control of wealth along with planning for the future makes for a happier and more fulfilling life—and one free from the fear of ending up a bag lady on the streets.


i “Why Women Are Weirder about Money than Men,” Slate, April 3, 2014

ii “2013 Couples Retirement Study Executive Summary,” Fidelity Investments, 2013

iii “Parents think boys are financially smarter than girls,” MarketWatch, August 19, 2014

iv “What do women want? Financial advisors who get it,” CNBC, March 18, 2014

Tags:  Bag Lady Syndrome, Boys and Money, Financial Advisor, Financial Fears, Financial Future, Financial Planning, Gender and Money, Girls and Money, Parenting and Money, Planning, Wealth Management, Widowhood, Women: Money & Investing

Note:  The content of this article is for guidance and information purposes only and is not intended to be construed as advice. Information provided is not intended to provide investment, tax, or legal advice.