Ronnie Kroell and Stephanie A. Jones, Contributor
Mother’s Day is fast approaching, when honoring the women of America comes into sharper focus. However, whether a mother or not — no one can deny the great advancements for women over the past twenty-five years. Women now make up a majority of college graduates, are nearly half of the labor force and are increasingly becoming the primary income source for their households.
Yet, today’s working women still seem to be under-educated on matters of investing and personal finance. According to a recent study conducted by Prudential, only 23 percent of women surveyed feel prepared to make financial decisions and only 12 percent are actively seeking to educate themselves about investing.
In the investment classes and workshop that I teach, women make up 70 percent of my students. Financial advisers and family members have discouraged them in handling their own finances. They’re told wealth building is a man’s domain.
However, I find that women are highly intuitive and make both great investors and online stock traders. This is important because it’s no secret women tend to live longer than their male counterparts. As a result, women have an even greater need to save for retirement and pursue a financial education.
For instance, if an employer has a 401(k) plan, conventional wisdom states a woman working in her twenties would be well on the road to a secure financial future if she starts contributing to her 401(k) plan sooner rather than later. A fifty-dollar weekly contribution can make a big difference over ten years. Most 401(k) plans allow an employee to invest as much as 10 percent of their gross income. Under federal law, an employee can contribute up to $17,500 of their gross income, and the company they work for can contribute up to a 3 percent annual match.
Whether because they think it is their only choice or due to a fear of taking control of their own money, most working women allow their 401(k) dollars to be invested in a mixture of seven to 10 mutual funds chosen and offered by the fund’s manager. This is where they go wrong.
Anyone with consistent income can start and contribute to an IRA (Individual Retirement Account). In fact, anyone can open an IRA with as little as fifty dollars. Additionally, you can transfer funds from your company managed 401(k) to an IRA that you manage yourself by investing online. Of course, the next question is what is the better investment, stocks or mutual funds? The answer is that most investors do better choosing individual stocks as long-term investments.
Getting started investing early will pay off big down the line. I encourage women to create a financial plan even if they are now in a committed relationship. Your financial plan should include your ability to own a home, take a five-star vacation and, of course, retire without the fear of outliving your money. The good news is that anyone can reach these goals. All you need is a financial education and a brokerage account for online investing.