Women's Work

Editor's note: This is the final part of a series

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."

Women's Issues

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.

Sachs points out that young women who decide to pursue motherhood outside of marriage have to consider a lot of issues in ways that married women don't. "Adoption is a big commitment [financially]; bigger than buying a house. The cost is significant in terms of change. It costs $20,000 to do it these days. It's a lot of money to go through the process. Of course," she adds, "it changes everything about their budget. Even from the single plan to a family health plan at work."

Barbara Steinmetz, a planner in Burlingame, California, tells of clients who followed decidedly nontraditional routes: "I had one client decide to become a single mom," she says. "She wasn't going to wait for Mr. Right. She went to a sperm bank where there was supposedly a superior gene pool." Other clients, she says follow a "rewards" program of sorts in that one uses her wealth to buy herself artwork; another buys jewelry. And a third, she says, took herself "to a spa in Monterey. She got a hotel room by herself, and went out and bought herself an expensive birthday present." For this woman, and many others, dealing with money is very much an emotional issue.

Money 101
If your young female clients are in need of an education when it comes to the world of finance, you can send them to the stacks for these books

By Marlene Y. Satter

Since many planners generally prefer that their clients don't mess with buying and selling stocks on their own, my first recommendation may surprise you. However, You Have More Than You Think: The Foolish Guide to Personal Finance, by David and Tom Gardner of The Motley Fool fame (Fireside Books, 2001), is an excellent place to start for those who are ignorant of, or intimidated by, their financial situation.

While the Fool's well-known "do-it-yourself" mantra has grated on the nerves of many financial professionals, much of the information herein is sound. The Gardners take complex financial concepts, break them into bite-sized pieces, and then feed the reader with those pieces in a non-threatening and highly amusing fashion. And since you, the planner, will be recommending the book to your client, you can have a few words to say about the section on how to do it all yourself.

The idea here is to help a client understand the process and learn to feel comfortable with the concepts of stocks, mutual funds, and the need to balance a checkbook. This book can accomplish all of these goals without boring your client to the point of abandoning the process

The book has a great deal to say about basic money wisdom, such as being wary of carrying balances on high-interest-rate credit cards, spending too much on unnecessary junk (or even on necessary items), and understanding the importance of investing versus saving. For someone who has put off understanding her money because she finds it threatening, boring, or incomprehensible, this is a painless and informative introduction to the basics.

Another excellent book that will help young women who "don't know where the money goes" is financial writer Deborah Knuckey's Ms.Spent Money Guide: Get More of What You Want With What You Earn (John Wiley & Sons, 2001). Knuckey deals forthrightly with the problem of what she calls "unconscious spending"--a common symptom of far too many people today, not just young women flashing credit cards.

With advice on how to recognize whether a purchase is a necessity or just an impulse buy, and how to determine if a prospective investment is wise or just a waste of money, Knuckey addresses the lures of marketing that encourage young people to buy the newest, fanciest, or fastest of whatever is being advertised. She also points out the need to save for the future and to put aside money to fund one's dreams.

Knuckey uses a pyramid approach not unlike the food pyramid, dividing her "Conscious Spending Model" into seven categories: Security (the foundation of the pyramid), Shelter, Sustenance, Self and Family, Social, Society, and Soul. The reader is asked to consider all her expenses and categorize them according to the divisions of the pyramid, considering as she does so whether she is getting enough satisfaction out of them to justify the money she's putting into them. If not, Knuckey suggests a number of strategies for shifting, eliminating, or even increasing expenses in order to balance the categories and make the money spent cost-effective. In the course of this self-discovery exercise, she says, people will often be surprised to find that money disappears in directions they had never expected--hence "unconscious" spending. It's much easier to plug financial leaks once they've been identified, and Knuckey points out a number of ways in which to do just that without feeling deprived.

Knuckey writes in a breezy, engaging, approachable fashion, and explains things in English rather than in financialspeak; even the most reluctant student should find valuable lessons here.


For clients who want to learn the ins and outs of their investments, there's How to Read a Mutual Fund Prospectus, by Thomas P. Lemke and Gerald T. Lins (Mercer Point Press, 1999). This excellent book will guide novice investors, or anyone who wants to understand more about mutual funds, through the ins and outs of prospectus language, format, and meaning. Highlighted with plenty of examples, the book provides explanations of what each piece of information in a prospectus is, what it means, and where it can be found in the prospectus--as well as how necessary that particular piece of information is to understanding the whole picture presented by the fund.

Written in plain English, and equipped with a "fast finder," an index, and appendices laden with information that include a glossary, a discussion of types of funds (both bond and stock), contact information for some fund groups, and a reference list of other books on mutual funds, this book should be mandatory reading for anyone new to the world of mutual fund investing.

For an excellent overall crash course in money, steer those clients toward Making the Most of Your Money, by Jane Bryant Quinn (Simon & Schuster, 1997). This will educate clients on everything from paying for college to living on retirement income, including such in-between steps as finding a good bank, learning how to keep good financial records, understanding mortgages, and figuring out how much of what kind of insurance to buy.

Weighing in at a hefty 1,066 pages, Making the Most of Your Money may look intimidating to someone who's been avoiding money all her life. (Personally, I favor massive books with good information.) On the other hand, it is clearly written, broken into individual sections, and can be read in stages or as needed rather than all at once. Any reader who manages to get through the whole book will be much better off for the experience.

Senior Editor Marlene Y. Satter can be reached at msatter@ia-mag.com.

"I find most professional young women to be mildly interested in the subject, and to have a strong desire to be responsible in the matter, but not enough to really dig in and learn it themselves," says Curt Weil, a planner in Palo Alto, California. "There's this conflict between responsibility and lack of interest. Just as my father was scarred by his parents' experience in the Depression and passed some of that scarring down to me, so too their mothers relied upon fathers for financial responsibility and they've passed some of that down to their daughters."

An interesting difference that Weil has noticed among clients is that those young women who have inherited a large sum of money, rather than making it, have more guilt--"more than men"--and they have "a lot more lack-of-self-esteem problems." Weil says he finds they are also much more likely, in his experience, to get taken advantage of. "The ones who earned it defend it," he says.

Down the Aisle or the Tubes?

On the subject of defending their money, one characteristic of young women that many planners have noticed is that they are very concerned with what happens to their assets if they marry. And there is also the side issue of how the man in the relationship feels if the woman is earning more money than the man. Third, there's the simple question of finding a mate at all. Planners say a number of young women worry that what they choose to do with their money now will have a negative effect on any prospective mate, and therefore are reluctant to take actions such as buying houses of their own.

Coutu says of the house dilemma that she always advises a client to buy, "as soon as she can afford the down payment, whether it's a house, condo, or co-op. Buy real estate, do not rent." She's seen single women rent for 20-30 years, with expectations in the backs of their minds about a joint life someday with a husband. But her strategy is to go for the house. She tells them to "establish an investment and a tax shelter for yourself. Sell it and make a profit. There's nothing wrong with buying an asset that you're only going to hold for a year or two. In this environment, you've made and saved yourself so much money."

Weil advocates prenuptial agreements, and if the client doesn't want to do that, then he suggests keeping assets separate. "He should have a separate account, she should have a separate account, and they should have a joint account." And they should discuss what to do with joint income. "Marriage is a partnership of two adults who have struggled mightily for autonomy," says Weil. "Both need autonomy in the marriage; each should have money they shouldn't have to account to the other for."

The issue of whether a significant other will accept a mate making considerably more than he does is a difficult issue that can go way beyond the question of separate accounts. Sometimes, says Coutu, it might mean the client should change her socialization patterns--seeking out other young, high-income people--to find a mate. The problem is not always on the man's side, Steinmetz points out. "Maybe it's as much her fault; maybe she gets overbearing or lacks respect for him because he can't keep up." This kind of issue delves deeper than most advisors want to go, but these are some of the issues they might hear about.

Steinmetz says that her female clients approach money matters differently than men. Women want to understand why they're doing something and want to get all the information before they make a decision. "A man will say, 'That darn broker. I shouldn't have bought that stock he told me to [buy].' A woman will say, 'I shouldn't have done it. I should have thought about it more.'"

Weil's experience seems to confirm this. "They know less about money and investing than the average guy, and on the other hand, they have a lot less ego involved and are willing to learn. It makes them a dream to work with."

Some of the issues they need to be apprised of are the whole insurance picture and the alternatives to retirement planning besides 401(k)s. Generally, they don't need life insurance unless someone is dependent on their income, say planners; disability insurance is another story, particularly if they are independent.

Some of the young women Pohl works with are first-generation Americans, and she is learning Spanish to be able to deal with them more easily and offer them a greater comfort level. "I worked with one woman of Mexican descent," she recalls; "her parents are here in the United States and she has a whole passel of brothers. Suddenly she is the financial guru for the family," Pohl relates. "She's not a finance major. But even her oldest brother calls her when he thinks he needs a new car." She tries to help these women deal with a host of issues that have to do with being the "expert" for their families when they are themselves in the early stages of learning.

Another area where women could use a guide is in setting goals. Says Coutu, "Women aren't specific enough with regard to their goals. They want to be financially okay--successful, secure, live a good life. They have to say they want retirement at 55, a new home in five years, they want to start a business in year X, establish specific goals. That's what an advisor should narrow them into. What do you mean by successful? What is retirement? What age? What will you do? Draw me a picture. What kind of education do you want for your kids--four years in public college or private medical school? We [women] generalize instead of setting sound dollar and time goals."

The Right Approach

"Being a planner is about money, but it's more about dealing with people, issues, emotions, becoming a part of their life," Steinmetz says. "My practice is not, 'Come, let me give you a plan, and goodbye.' I want to become a piece of your world and make your world better."

Following this road, planners might end up as more a part of a young woman client's life than with more typical clients. So what's the best way to handle these clients?

"Keep it simple and avoid using professional jargon," Sachs recommends. "As soon as planners start talking about internal rates of return and other 'stuff', women will say, 'Exactly what I feared. I knew I wouldn't understand that stuff.' Anyone can understand it if you take the time." Sachs accomplishes this education by using phrases and techniques that previous generations used: A penny saved is a penny earned. Don't put all your eggs in one basket. Write down what you spend. Use cash in envelopes. The concept of cash itself, she says, is difficult for today's women; so many people have grown up with credit cards that the idea of using cash for things is almost alien.

Above all, "Keep it simple, take it slow," says Sachs, "but at the same time treat your clients with respect."

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