Hello, single ladies, this is your financial wake-up call.
A recent study from Fidelity Investments looked at the financial planning and investment habits of never-married women, divorced women and widows. What it found was that a large share of these women don’t have in place the planning, investments and emergency provisions that lay the foundation for a secure future and greater wealth.
“Women have more financial earning and decision-making power today than ever before,” says Kathleen Murphy, president of personal investing at Fidelity. “And yet, too many limit the benefits of that power by shying away from taking control of their financial futures.”
Women are making more money, but …
First, let’s look some of the reasons these women aren’t doing better with their money. Then, we’ll get to how to change course.
Even though nearly all (97 percent) of single women surveyed said they believe it is important to be engaged in managing their money, the Fidelity study found them making three overarching mistakes:
- They underestimate their ability to handle money.
- They worry about the future, but often fail to create a long-term plan.
- They rely too heavily on cash holdings, missing out on more profitable investments.
Looked at in more detail:
- Forty-eight percent of single women tend to spend without thinking about the long term.
- Nearly 47 percent of single women do not have an emergency fund in place.
- Single women are also less likely than other women to have a will, health care proxy and estate plan.
- Eight in 10 single women keep a portion of savings in cash, with 35 percent reporting keeping 50 percent or more of their savings liquid.
Widowed, divorced or never-married
Of course, there are differences among single women, depending in part on how they arrived at their single status.
Never-married women have done the least amount of financial planning, compared with widowed women and divorced women, the Fidelity study found.
That may be because, according to a separate study, something about getting hitched prompts many people to look more seriously at their finances. According to TD Ameritrade’s Marriage & Money survey, about one-third of respondents said that after getting married they paid more attention to their finances, found the partnership a source of moral support for staying on track financially, and relied on their spouses to help manage savings and investments.
“For many Americans, wedding bells serve as a wake-up call to get their finances in order as they now have a partner to think about, says JJ Kinahan, chief market strategist and managing director at TD Ameritrade. “Having a spouse, and perhaps for some a family, can encourage better financial habits, deter overspending, and keep long-term goals in focus.”
Fidelity found that just 17 percent of never-married women have a comprehensive financial plan in place. Only 46 percent of never-married women have a three- to six-month emergency fund. Just 16 percent of never-married women have a will. Only 9 percent have an estate plan. And just 19 percent have a health care proxy.
In contrast, widows seem to have their finances much more settled, with 56 percent of widows having a comprehensive financial plan in place and 75 percent of that group having an emergency fund. Eighty-one percent of widows have a will, 64 percent have an estate plan and 72 percent have a health care proxy.
Divorced women fall somewhere in between never-married women and widows in terms of their financial planning. Thirty-two percent of divorced women have a comprehensive financial plan, and 56 percent have an emergency fund. Fifty-five percent of divorced women have a will and 29 percent an estate plan. And 44 percent of divorced women have a health care proxy.
Do you see yourself, or someone you know in those numbers?
Turning it around
If so, it’s time to turn it around .
Fidelity Investments urges you to get into your financial front seat: Know what you own, what you owe and what your goals are for your money. Only then can you to ensure that your investments are working toward the future you envision.
Put financial safeguards into place, including a holistic financial plan that accounts for your individual situation and goals.
Take the next step from saver to an investor. Make sure that you choose investments suited toward your tolerance for risk, and time horizon to save.
Luckily, the financial fixes are easily learned and accomplished, a step at a time:
Establish an emergency fund, pronto. Emergencies happen to everyone. Whether it’s a big car repair, job loss or unexpected home repair or a health crisis that knocks you out for a couple of months, having money put aside for such occasions helps you sleep easier at night. If you’re not sure how to get started, check out: “9 Ways to Build an Emergency Fund When Money Is Tight.”
Get a grip on your income and expenses. These days, an array of apps and online tools make it so much easier to make a budget, adjust it, and stick to it. Our favorite budgeting tool is Money Talks News partner YouNeedABudget. Read this post to find out how it works. But there are other good options that offer different approaches, including: Mint, Prism and Pocketguard.
Invest: Fidelity found that many single women are saving, but keeping that money in cash. That means that over time, inflation is likely to erode the value of that cash. It also means that they are missing out on investments that can earn more for their future security and retirement.
The easiest way to invest and save for retirement is surely an employee sponsored 401(k) account. If you’re lucky enough to have one and your employer matches your savings to that account, be sure you are putting in enough to get the employer’s maximum matching funds. That’s free money!
To learn about the common types of retirement accounts, check out: “Roth, Regular IRAs and 401(k)s Made Simple.”
If you are working for yourself, on contract, or for a company that doesn’t offer retirement accounts, never fear! You can start investing even if you don’t have a lot to begin with. Start here, with “8 Basics That Beginning Investors Must Know.”
That’s just a sampling of the tips you can find on Money Talks News posts. And don’t forget to check out our Solutions Center, where we can connect you with the best credit cards, help find assistance with debt and credit restoration, compare cellphone plans, mortgages, loans and much more.
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