Saving, investing, budgeting, earning, and protecting assets are financial management tasks that have no gender. Yet men and women face different challenges when it comes to their money. Men typically earn more—a recent PayScale study found a 25.6% overall pay gap—while women tend to live longer (three years, on average) and are also more apt to take time off from their careers. Studies show that women feel less knowledgeable and less confident about their investing decisions.
All these differences have broad financial implications when it comes to your long-term planning.
So do men and women need different approaches? MONEY assembled a panel of experts at the Financial Planners Association conference in Boston this fall to tackle this question. The conversation and a few follow-up interviews addressed attitudes and aptitudes, savings rates, long-term-care coverage, personal goals, investing strategy, Social Security claiming, and more.
- Lazetta Rainey Braxton: Certified financial planner (CFP), founder of the planning firm Financial Fountains
- Kerry Hannon: Author of 10 career and personal finance books, including What's Next? and Great Jobs for Everyone 50+
- Diane Harris: Editor of MONEY and co-author of It Takes Money, Honey, a personal finance book for women
- Eileen O'Connor: CFP, managing principal of Hemington Wealth Management, and co-author of the "Women of Wealth" series of studies
- Rachel F. Elson: Assistant managing editor of MONEY
Before we get into the nitty-gritty, let's do a lightning round on the big question: Should men and women manage money differently?
Diane Harris: The saving and investing basics are the same for everyone, but there are tremendous gender differences in knowledge, temperament, and attitude toward money. And some of the very specific and unique challenges that women face may necessitate a different approach.
Kerry Hannon: Not necessarily, but men and women can certainly learn from each other.
Eileen O'Connor: I would say no. Men and women should let their goals, not their gender, drive the investment choices.
Lazetta Rainey Braxton: Yes—because the differences give balance to a married couple's portfolio.
Let's dig into the specifics. What are the differences between what men and women say they want when it comes to advice?
LRB: Most of the women that I work with are just very busy. They're professionals, but they're not professional investors. And they really want to understand what they have, starting with retirement plans, and to think about what their options are. So what they want is education.
Many people—men and women—didn't get this education formally, and some of us didn't get it within our households. But women tend to say, "I just want to understand what we're doing so that I can feel confident about the decisions that I'm making about my investments."
Men, on the other hand, have a noticeably different risk appetite. They want to know how much money they can make, based on their investments. Women tend to say, "I want to meet my goals and be comfortable." Men say, "I want to maximize every dollar." It's almost a competitive thing.
- See the data: Men, Women, and Money: What They Say vs. What They Do
DH: Women also tend to like a more collaborative approach than men do, and prefer joint decision making, according to a study MONEY did last year on married couples' finances. When it comes to managing money with their spouses, men tend to say, "I do"; women say, "We do."
We also found, in a separate survey, that women are more likely than men to want a little money of their own. They want some spending money in a judgment-free zone. Men are more likely to want all assets merged.
EO: Women generally are dissatisfied with the advice they're getting from professional advisers. In our original "Women of Wealth" study, we found they were looking for guidance about a wide range of issues, from charitable giving to career development to higher education.
Men and women also tend to save differently, right?
KH: A few studies show that men contribute less than women do to their retirement accounts. Fidelity, for instance, found that women were contributing more to workplace retirement accounts than men were, no matter their salary. And a Vanguard study found that across the board, 73% of women fund employee retirement accounts, compared with 66% of men.
But anecdotally I see something a bit more nuanced. When I talk to people, I find that men in their twenties and thirties tend to save and not spend, while women in that age group spend and don't save. That flips in their forties and fifties— men start spending, and women start saving more. But at that point women have missed that compounding boat. That concerns me.
Also, I think men may be investing more outside their retirement accounts; they may be more apt to play the stock market.
We hear about this investing "confidence gap" between men and women. Are there planning implications for couples?
DH: Here's the problem with the "confidence gap." When you ask women a broad question about confidence, they express that they don't feel confident. But when you get to specifics—when you talk about the specific, different aspects of money management—the picture changes.
In a MONEY survey last year, for instance, only 28% of women said their husbands are actually better than they are at retirement planning. Another 41% said they were equally good at it, and 31% said they were better than their husbands.
At the same time, women really like to feel that we understand what we're doing. I'm going to make a gross generalization here, but unlike men—who might occasionally take a stock tip on the golf course—women are not going to pick up a stock tip from somebody who's, say, coloring our roots. We want to know what we're doing and understand it. It can feel overwhelming.
The trick is to make financial tasks manageable. Focus on three key goals or three steps to take, not 37.
KH: There's another aspect to consider. Men's investments can actually suffer from overconfidence. Male investors tend to swing for the fences; they think they can beat the market. That bravado, which tends to result in more trading in and out of the market, doesn't really serve them well.
DH: Exactly. In survey after survey after survey, women express that they are a lot more conservative than men when it comes to managing money. And it's seen as a negative.
But a seminal study from University of California professors Terry Odean and Brad Barber, called "Boys Will Be Boys," looked at account data for 35,000 different households and found that men's trading decisions reduced their returns by almost one percentage point more per year than women's did. The difference did not come because men were worse at picking investments. It came because women traded less often, making fewer bad bets and incurring fewer fees.
Men and women have different strengths. The best thing couples managing their money together can do is to play to those different strengths. So men may want a higher equity allocation and may want more aggressive investments—say, more in small-caps. But the fact that women are more conservative may give them a blue-chip, steady-growth orientation. And a mix of those two approaches creates a better, balanced portfolio.
When do the different attitudes become a problem for clients?
LRB: For investments, you can't be extremely conservative and generate enough growth to cover expenses in retirement years. So if women are more conservative, I make sure they are comfortable with the investment strategy. I try to hear why they're making certain investment decisions, and then we match up their goals with what the portfolio looks like. I say, "It's a tradeoff—if you want to do this, maybe we need to be a little bit more aggressive in your portfolio."
With male clients, by contrast, I often have to share what investments may be off limits. For my clients who have a few hundred thousand dollars to invest, I have to tell them, "If you want a higher-risk asset, like certain private equity or other alternative investments, you have to wait until you're at a different wealth level."
EO: I find that, in general, our male clients love trading for themselves; they have a harder time giving it up. Women tend to say, "Just take it off my plate."
That's a generalization: I have stay-at-home-mom clients who are very sophisticated and want to get under the hood in terms of investments, and I have very high-powered executive women clients who really don't care about the details.
If our male clients want to make their own bets, though, we'll tell them to keep a separate account where they can make trades, try something out—just 1% or 2% of their total portfolio. But we won't take trading orders from them. We're the experts; that's what they're paying us for.
How do some of the differences we've talked about affect various types of clients? Do entrepreneurs, for instance, have distinct needs?
KH: When it comes to being a successful business operator, male or female, it's all about financial fitness. How do you do a budget? Where can you cut back? How can you get financially fit? Because debt is an incredible dream killer.
But I think small-business help is more important for women than for men, especially boomers, because running a business is going to be a bigger piece of their economic picture. For women who have stepped out of the workplace to raise a family for a few years, getting back into the workplace is really tricky—particularly when you're over 50. So a lot of these women start their own businesses.
The tendency, particularly for women, is to dip into retirement accounts to get that business off the ground. In fact, women are more likely to borrow from their retirement accounts than men are.
But there are plenty of other ways to find the capital to start a business. I often suggest tapping friends and family, borrowing from your own network. Kickstarter or other crowdfunding sites can be helpful, particularly for smaller amounts. There may also be economic development loans in your community. And although I'm not always a fan, home-equity loans can be an option, depending on your family's financial security.
What are some specific ways you'd suggest that couples address women's longer life expectancy?
EO: It's critically important for us to treat each client as an individual, not as a male or female in a couple. For everyone, we plan as if the client will live to 100, for both men and women—105 in some cases, if there's good longevity in the family.
KH: One way to address women's longer life expectancy is to adjust a couple's Social Security strategy. It's imperative that both men and women understand this. If a woman made less than her husband or didn't work, you need strategies that allow the wife to take from her husband's benefit. For example, delaying the benefit for the higher earner is often the best move.
Most women over 65 will be single at some point in their life, and for quite a while. So married couples have to do Social Security planning both as a couple and as individuals. Make sure you talk to a planner who has that expertise, because you need to consider as a couple how your strategy will affect the surviving spouse.
LRB: With my clients, long-term-care coverage is extremely significant. If a husband becomes ill first and requires care, those costs could deplete a couple's assets before the wife has a chance to use them.
DH: This advice holds true for women and men, but it is particularly important for women who have not been deeply involved in their family's financial planning: Know where all the documents are. Because it is more likely that women will find themselves on their own one day—and you don't want to be in a state of grief and still have to figure out where everything is, how much you've got, and who you're working with.
This discussion has been edited and added to in follow-up interviews.
How do you manage money with your spouse? Let us know at email@example.com.