Start Investing, Sister!

This post is one of many written for the #WomenRockMoney Movement, a collaboration of many personal finance bloggers for International Women’s Day. We’re trying to fight gender inequality in money. Check out the rest of the posts and join the movement HERE.

Over the past couple of weeks two very different, awesome women asked me for financial advice. One is in the beginning stages of her career. The other is making plans for her retirement, coming up in five short years. They were great conversations, and I was humbled that these women were willing to open up about their finances to me.

In both cases, they had questions about the very basics of investing. The former was unsure whether she was actually contributing to her workplace retirement plan and to what degree. The latter was trying to do some last-minute saving for retirement, but felt uncertain about whether they should put any of the savings into the stock market, since they might “lose it all.”

What these questions highlighted to me is that, while America sucks at teaching financial literacy in general, women are particularly getting left behind. We are now more educated than men, but somehow have far less than men in retirement savings. This is a tragedy, because…

Women Are More Hurt By A Failure to Invest

Dudettes, on average, live longer than dudes. Five to ten years longer. This is a statistic that I think most people know. What I think most of us don’t think about is what that means for us financially. First, it means we cannot remain ignorant about money and rely on men to do our “money stuff” for us, because odds are, we’re going to outlive them. How will we manage after?

It also means we need more money than men in retirement. Women are 80% more likely than men to live in poverty in their old age, and that can be partly attributed to the fact that we need 5-10 more years’ worth of savings than men to keep up our standard of living.

So how do we get that money?

Investing Is the Only Way

I get it, investing seems scary. What if you make a bad investment, and you lose money? Isn’t it easier to just keep what you have in savings and not worry about it?

If only it were so, friend. Unfortunately, there is an evil monster called inflation.

Fearless Girl stares down the Wall Street bull

Inflation is a decrease in the amount of stuff your dollar buys. It happens to the tune of around 3% per year, so every year your money buys 3% less stuff, and the next year 3% less again, and so on.

Right now, there are no savings accounts or CDs (that I know of) that come remotely close to keeping up with that loss. So, while the risk of investing seems scary, understand that by doing nothing, you are ensuring that you will lose 3% of your money annually.

Some women will invest in real estate. That is completely outside of my wheelhouse, but more power to you if you can make that work. For most of us, though, investing means putting money in the stock and bond markets.

A lot of women are afraid of the stock market, and my sneaking suspicion is that it’s because the investment industry, from the day trader on the floor of Wall Street to the financial advisor sitting in their leather office chair, is overwhelmingly comprised of men. Men who want to show expertise by making investing seem really complicated. But here’s a secret:

Women Are Better Investors Than Men

When major investment firms compare the returns of male versus female investors, women win. Ironically, the reason researchers think women get better outcomes is because of male “overconfidence.” Basically, men feel like they are better able to time the market (a.k.a. buy low and sell high) so they trade a lot more often than women. Turns out, market timing is difficult to get right, so the fees from all that trading built on so much “knowledge” eats into male returns. Women are more likely to buy and simply ride with their investments over the long-term, and it puts them ahead.

I’m telling you this because I want any woman who feels unsure about investing to know that not only do you have a place at the table, but your lack of surety may be the very thing that makes you a better investor than any of the guys sitting beside you. Don’t be cowed by the bluster and jargon of the investment world. You can do this.

Here’s How to Take Action

Hopefully I’ve sold you on why it’s really important that you, as a woman, begin to invest. Here are three initial steps to get you started.

1. Get Rid of Things That Stop You From Investing

In other words, make sure you pay off any high-interest (>7%) debt. Investing while you have debt that’s growing at a rate faster than your investments doesn’t make much sense. You should also get a budget that works for you. If you need help understanding how to do either, pay particular attention to the resources from Erin Lowry and Desirae Odjick on the resource list below.

2. Find Out If You’re Currently Investing

If you work for a company, find out if you’re putting money into your company 401k/403b account. Your HR or Payroll Manager can help. Also check on whether your company offers a match (which means they put the same amount of money into the account as you). If so, find out what the percentage match is, and make sure you’re investing up to that percentage. I can’t think of any case where you would not invest up to your company match, unless the match was really high or it was a matter of keeping your lights on. That’s a free 100% return on your money!

If you’re alternatively employed (a freelancer, stay-at-home mom, whatever), open an IRA and stick some money in it. These can be opened with any major investment firm. Fidelity and Vanguard are two common ones that people go with.

3. Decide What Types of Things You Want Invest In, Then Do It!

For many this means getting a little bit better informed about what the stock market is and how it works. I promise learning the basics doesn’t have to be hard or boring. In fact, if anything starts to feel discouraging, assume that the resource is poorly written and move on to something that makes more sense. Here are a few resources to get you started:

  • Desirae Odjick of Half/Banked’s What You Need to Know Before You Start Investing: It is exactly what it says it is. Her website also has tons more resources on investing and personal finance as a whole you could investigate from there.
  • Frugalwoods’ Why We Ignore the Stock Market and You Should Too: A succinct rundown of the investment philosophy that allowed the Frugalwoods to retire in their 30s.
  • The Investing 101 series here at How We Do Money: I wrote this for my friends who asked how to get started.
  • Broke Millennial by Erin Lowry: A comprehensive, super accessible book on personal finance, with some great chapters on investing.
  • The Bogleheads’ Guide to Investing by Taylor Larimore: For me, this is the investing book, covering everything from what a stock is to very technical parts of asset allocation. It’s also the only male-authored resource I included on this list.

Once you understand the basics of what investing is, you’ll be able to choose investments that are the right mix of risk and return for you (psst, target date funds and robo-advisors make this part absurdly easy). Then, it’s just a matter of putting money into them. It really is as simple as that.

So start investing, sister!

11 Replies to “Start Investing, Sister!”

  1. Mrs. Adventure Rich

    Tip #2 made me smile… when I started my first job, I enrolled in the 401K with no idea what it was other than that it was “good”. A few months later, I tried to find out how to invest and was shocked to find out I was already investing!

    • Ms. Steward

      Yep! This just happened to a friend of mine! The employer had an opt-out system, so was pleasantly surprised to learn she was already contributing and getting a match! I love it when employers make it easy to choose the right thing.

  2. Erin | Reaching for FI

    Yes, investing enough to get the free match is SO important!

    I love that some employers offer an opt-out system for investing so everyone’s automatically enrolled to contribute to their 401(k)s. Hopefully more and more companies move to that model!

    • Ms. Steward

      I love that, too! Both of my large employers have an opt-out system, which is probably why so many friends of mine have been surprised to find out they are already investing!

  3. Peti @ The Leveraged Mama

    This is great and shareworthy thanks Ms. Steward. Lots of people don’t quite click when you tell them they are already an investor because of their retirement funds – it’s like, jump on the bandwagon because your money is already working for you! And yes I agree – a bank savings account is where money goes to die! 🙂

  4. Sarah | Smile & Conquer

    Driving home the fact that women need more money in retirement because of the difference in life expectancy is so important. It’s a reason why women should take the lead, or at least play an equal role, in managing the household finances.

  5. Kate @ Making it Rain

    This is exactly the kind of post that got me started with investing, so thank you for sharing with other women. It doesn’t have to be complicated and overwhelming, and as you pointed out, most of us could be doing it through our work plans and not even really know!

    I am really working on conveying these basic investing concepts to my younger sisters while they are still in their 20s. Starting young is such a huge win!

    • Ms. Steward

      Thanks for the compliments. Glad you liked it!

      Do your sisters seem receptive to the advice? Has there been anything that has helped to drive it home for them best in your conversations?

  6. Simon |

    A timely article. Time Money has just reported that the richest 10% of Americans now own 84% of all stocks. So if you want to prosper, you’ll need the courage to start investing and riding the waves of the market.

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