Knowledge, Experience, Action Quell Women's Money Fears

In August 2006, Minneapolis-based Allianz Life Insurance Company announced findings from the Women, Money and Power Study, a survey the company commissioned to learn about individuals' attitudes and behaviors around money. The study was significant in that it revealed many women's lingering insecurities about earning, saving, and managing money--despite their advancements in education, earning power, and wealth.

According to responses, 90% of women felt somewhat or not at all financially secure. Almost half the women said they had a fear of losing all their money and becoming a bag lady--homeless and destitute. Roughly the same percentage of women earning more than $100,000 a year had the same fear.

While some worries might be labeled as irrational--the ranks of the homeless are not populated in great numbers by women who once had six-figure incomes--money anxieties are a red flag that you shouldn't ignore. Unaddressed money fears--even unfounded ones--can prevent you from taking control of your finances, making the best choices, and achieving peace of mind.

Lack of confidence, participation at root of money fears

Olivia Mellan, co-author of "Money Shy to Money Sure: A Woman's Road Map to Financial Well-Being" and a psychotherapist specializing in resolving money conflicts, says "many women have been programmed that they won't be good at this money stuff." She cites a survey of high-school students that supports that theory. When asked how good they were at math and money, the boys assessed themselves as "pretty good," while the girls assessed themselves as "not very good." In fact, both groups knew the same amount about money, but the girls lacked confidence.

This lack of confidence, along with what Mellan cites as a naturally higher aversion to risk, may be the reason many women are quite willing to avoid a hands-on role in managing their finances.

Although the Allianz data refute the notion that many women are Cinderellas waiting for a man to come along and take care of them (only 8% of survey respondents identified themselves as such), experts in the field say that that is exactly what they see.

"We have a white knight thing," says Carol Ann Wilson, a Certified Financial Planner® (CFP) and certified financial divorce practitioner® based in Longmont, Colo. "I see so often women who are not interested in financial issues--they don't even know what their husband earns."

Barbara Stanny, the daughter of one of the founders of tax preparation service H&R Block, wrote a book on just this subject. In "Prince Charming Isn't Coming: How Women Get Smart About Money," Stanny admits relying first on her father and then on her husband to manage her money. Forced by a crisis to finally take control of her finances, Stanny discourages women from ever handing over complete financial control to someone else--or even subscribing to the idea that someone or something will come along to rescue them financially. Even a seemingly innocent daydream of winning the lottery becomes a problem if it leads you to put your financial future in the hands of fate.

Are your fears reasonable?

While nearly half of women worry about becoming a bag lady, not many of them have reason to lose sleep. The odds of Katie Couric, who Mellan says has admitted to having a bag lady fear, actually living on the streets someday are slim.

On the other hand, some women really do have cause for concern: seventy-five percent of the elderly poor are women. Depending on which statistics you look at, the divorce rate is approximately fifty percent. And the average age of widowhood is 56 (women typically outlive men by six to eight years). Add to these statistics the fact that an at-home mom may no longer have the job skills to earn a living, and becoming a bag lady, or at least experiencing a dramatic change in lifestyle, looks, if not likely, at least possible.

In her book, "Money, A Memoir: Women, Emotions, and Cash," Liz Perle, a former publishing executive, recounts just how easy it can be for an intelligent woman to relinquish financial control to her husband--something she calls "voluntary blindness." After her marriage suddenly ended, she found herself a single mom at 42 with no job, no home, and almost everything of value--including the credit card she carried--in her husband's name.

To help her clients determine if their anxieties are rational or irrational, Mellan has them write down their fears and consider what they would do in each worst-case scenario. Afraid of life after divorce? The time to figure out what assets you would retain and how you would support yourself is while you're still happily married. Once you know what you're facing, you either can relax and stop worrying, or you can make conscious choices over the years that will protect and prepare you if the worst should happen.

It's equally important for single women to go through the same analysis. For example, if you became disabled and couldn't work, how would you pay your bills? Do you have disability insurance through your employer or independently? If the answer is no, you have reason to be concerned. You also have the information you need to take action and quiet your fears: Get disability coverage, set up an emergency fund, and then stop worrying.

Sheila Peters, author of "You Don't Have to Be a Bag Lady!: A Humorous Survival Guide for the Reluctant Investor," thinks it pays to go to a fee-based financial planner to get an "impartial reality check" from a professional.

"You need to get an objective viewpoint," says Peters, who sees a financial planner herself despite being an active member of an investment club. With that, you'll know if you're worrying for nothing--or if you're enjoying a false sense of security.

Overcome fears through action

"You're not going to get any better [at dealing with your finances] by standing on the sidelines," says Peters, who along with other experts urges women to face their money fears head-on.

Here are some specific steps you can take to dispel your fears and prepare for a financially secure future:

Learn about money management. When it comes to matters of personal finance, ignorance is not bliss. Learn about money management, investing, and financial planning by reading articles and books, visiting reputable personal finance and investing Web sites, and requesting information from trusted sources such as the professionals at your credit union. Peters encourages those who are new to finances to find and associate with people of like mind, through classes, clubs, and online and offline communities.

Be involved in the household finances. To avoid a harsh wake-up call like Perle's, women need to be actively involved in the family finances. Insist on being included in financial tasks and decisions even if someone else says they'll take care of it or resists your involvement. Wilson says "women need to get some backbone" in this area, since it's absolutely crucial you know what you have, where it is, and whose name it's in. If you're single, make personal finance a part of your life--don't ignore or avoid it in hopes that someone or something will come to your rescue.

Set up accounts in your own name. Make sure that assets and accounts are in your name too. Wilson also thinks it makes a lot of sense for a married woman to have a cash-equivalent emergency fund in her name only.

Save and invest. According to the Allianz study, financial security and freedom are 15 to 20 times more important to women than status. To attain that security and freedom, you need to save consistently and invest wisely. Though women tend to be naturally more risk-averse, various studies have concluded they often make better investors than men.

Stay employable. Wives and mothers often put their careers aside, which leaves them at a disadvantage if they become widowed or divorced. To make sure you can re-enter the work force if necessary, maintain your moneymaking skills or develop new ones. Consider what job you could get if you had to start earning a living tomorrow--then prepare for it. If possible, work at least part time even if you don't need the money.

Communicate your fears. Mellan encourages couples to communicate openly about money, and suggests something as simple and straightforward as, "Honey, I know this is irrational, but I'm gripped by this fear. Is there anything you can do to help me feel better about this?" Together, you might come up with ways to achieve some peace of mind, such as setting up a spousal IRA (individual retirement account) in your name.

Protect yourself. According to Wilson's article "How to Help Older Divorcing Women Avoid the Bag Lady Blues" (Journal of Financial Planning, June 12, 2006), "older divorcing women are swelling the poverty rolls because the traditional 50-50 split of household assets can leave them broke." One way to avoid poverty after divorce is to understand the family finances and what you're entitled to (in some cases, that includes 50% of his retirement funds) and get good advice before you agree to a division of assets. A life insurance policy can protect you if you are widowed.

While overcoming your anxieties is sure to benefit your bottom line, the rewards of taking charge of your own financial well-being often are more than just financial.

"When women confront their money fears and do something about them, and they become knowledgeable and in control," says Mellan, "they experience the most profound sense of serenity, confidence, and security."

Published May 14, 2007