One of my first real jobs out of college was as an analyst at a large investment bank. I was the only woman on our entire team of 50. As this was one of my first real jobs, it was also my first opportunity to start investing in my 401(k). I was smart enough to know that putting money aside for retirement was something that I needed to do. The only problem was, I had no clue what I was supposed to invest in!
The irony of the situation is not lost on me. Here I was, working in finance, at an investment bank, no less, and yet I really didn’t understand how to manage my own personal portfolio. Like a lot of women, I lacked confidence in my own financial skills, and was intimidated by the idea of learning how to invest. For advice, I turned to the more seasoned finance professionals around me, all men. They told me what to invest in, and I blindly followed their advice. Truthfully, the returns weren’t terrible, but I regretTed following the lead of others without taking the time to educate myself.
This moment proved to be a distinct turning point in my career. The embarrassment of walking into my colleagues’ offices to ask them what I should do with my money did not sit well with me. I decided that I needed to take ownership of my personal finances. Shortly thereafter, I began studying to become a certified financial planner, and over time, developed confidence in my financial knowledge and ability to handle my own financial affairs.
It can be intimidating for us women to operate in what we perceive to be a man’s world, and certainly, finance sure feels like a man’s world. However, with women having more education, status and money than ever, it is even more important that we develop an understanding of personal finance, investing, and retirement planning. Unfortunately, women lack confidence in their financial acumen. A study by Merrill Lynch found that 55% of women surveyed believe that they “know less than the average investor about financial markets and investing in general”, as compared to only 27% of men who feel this way. This is especially astonishing given that women overwhelmingly tend to manage the day-to-day household cash flow.
This financial lack of confidence comes at a big price.
A 2011 study performed by the National Bureau of Economic Research concluded that “those who are more financially literate are more likely to plan for retirement.” In other words, financial literacy is critical to long-term financial success.
It’s OK not to know everything about finance, and you don’t need to become an expert like I did. However, it is critically important to work toward gaining a better understanding. This is especially true for women who are receiving financial advice from others. It can be very tempting to ask for financial advice and simply take your adviser’s word for it–and there are advisers out there who still operate under the assumption that this is the kind of service women want. However, women need to feel comfortable asking questions in order to understand the reasoning behind the advice.
What’s not OK? Sticking your head in the sand and letting someone else take care of it for you.