I just read a Real Simple article about how women are not very financially savvy when it comes to the “big picture.” Apparently, we’re very good at being frugal, using coupons, and budgeting around the house, but we fall significantly behind men at long-term investing and saving for retirement.
And, at least in my experience, that is totally true.
Back during senior year, we got out of our regular classes to attend a financial literacy seminar. I remember almost nothing from the seminar except that the speaker pushed us to open Roth IRAs immediately. While he droned on an on, I sat in the auditorium with my two best friends, being a generally apathetic, irresponsibly self-confident teenager.
I actually saved this cartoon that [Roommate] Tina and Ashley drew during the seminar. I have no idea why they drew the speaker as a baby-man wearing a diaper. However, I do remember that we thought “CC” in his powerpoint should stand for “Chocolate chip [cookies]” and not “Credit Cards.” Yes, the profound thoughts of a high school senior.
[Tina dubbed me "Chauncey" for some reason that I can't remember.]
[Click to enlarge]
For whatever reason, financial advice doesn’t stick with me very well, and according to the Real Simple article, this is the case for an alarming number of women. Money talk is intimidating and because I wasn’t drowning in debt, it seemed easier to pat myself on the back for not being in the red–even if I wasn’t doing anything about the future. Also, I am in grad school, and one of the responsibilities of a good graduate student is to complain bitterly about the insufficiency of your stipend.
I think another part of the problem, especially with the aforementioned seminar, is things are not put things in the correct perspective for young people. $100,000 seemed like so much money back in 2004, when I was making $6.50/hour working at a bagel store. Why would I need to save more? Why would I need to invest money if I could amass what seemed like a huge chunk of it? I failed to understand clearly that a lot more money would be needed for things like a house downpayment or that you have to amass a crap-ton of money for retirement.
And I am not placing blame here. It’s totally my fault for not getting involved earlier, but like most things I do, I have to reach my own internal tipping point before I jump into something new.
Like I said, I don’t make much money as a graduate student, so I don’t have all that much to invest. Nevertheless, thanks to some my generally good saving habits and my parents’ generosity, I have enough to get myself started. The important thing, I think, is establishing good habits. And apparently, the earlier you open your retirement account, the better!
So last week, I opened a Roth IRA and purchased a LifeCycle Fund. I also set up a small automatic monthly investment. In general, I like the idea of automating my saving and investing so that it works for me while I do other things…like play the ukulele and bake cookies.
I don’t find money matters to be all that interesting, so I wanted to become somewhat knowledgeable without overwhelming myself with contradictory information. It’s not like I’m not going to play the stock market for fun, so I picked a “basics” book that would give me a good overview to get me started. I highly recommend Ramit Sethi’s I Will Teach You to Be Rich. (This is actually a deceptive title. Sethi teaches you how to prepare for the future and have a “rich life.”) I felt a little silly reading a neon orange and green book with a goofy title while the boyfriend finished The Intelligent Investor, but I knew that wasn’t going to hold my interest at all. Plus, Sethi advocates setting up a totally awesome, automated system that I could totally get excited about.
[I am in no way affiliated with Ramit Sethi, nor am I paid to endorse his book. I just really, really love it. I even read it twice because it gave me such a boost of confidence in my ability to get control of my financial life.]
So yeah, maybe everyone else already jumped on the financial literacy bandwagon, but according to Real Simple, we women are falling behind. And yeah, that’s not cool at all.
I read Ramit’s blog and get his newletter. I read his book and a lot of his information is sound but I was raised to be somewhat smart. I’ve never NOT paid a credit card bill, I do have a car payment but I made sure I got a second job (GF) to support that and while I have educational loans, those are on hold until I graduate (if).
He goes crazy about Roth’s and I agree, problem is the capital which I don’t have (I do, but I like have my money in accessible savings, I don’t like earning .4% interest though). That being said, when I read Ramit, I decided that I would open a Roth at 28 and cash in some long bonds left over from a great-grandmother that will have finally matured after X years.
What is LifeCycle?
MISS YOU
Did the article mention the gender difference in access to wealth as one of the reasons women may not be worrying about retirement or investing? Women who aren’t married and don’t have family wealth face not only the fear of being paid 70-80 cents to a male counterpart’s dollar, but don’t have extra income of a spouse or family member to fall back on. Every nickel counts, and living paycheck to paycheck (and often still coming up in the red) is the experience of more and more people our age.
And what’s weird about our generation is that graduate school used to be a luxury, but now it’s almost a necessity to get even a entry-level position in most career tracks. If someone just spent tens of thousands of dollars on an education that only lands them a job $5K per year above what they’d be making had they just stuck with a BA/BS, it’s difficult to look at the bigger picture.
We are starting our adults lives in much deeper debt than the average adult of even half a generation ago, let alone our parent’s generation. I’m lucky that my new job force-withdraws money from my income for retirement– I don’t even have a choice to save for it. Then again, I work for the state so who knows what will actually be available to me when it’s my turn to retire.
That was an interesting article, wasn’t it? I remember sitting down with the investment rep at work when I started my current job and he explained everything to me…but I don’t remember a thing. I just know that I put some money each month into a 403(b) (our version of a 401K) and that I rolled over my retirement account when I left my last job.
Even my parents don’t know much about it so they hired a guy! I wonder if he can be my consultant from 2.5 hours away…
I actually started 3 years before Matt. Go me? Ha.
I hired someone. That probably counts as cheating, but I know so little about it all. That being said, I went crazy and handled my own finances at work. So. Many. Accounts. (and passwords!)