Many women feel less assured handling finances, but surprisingly, they often excel in investment performance. What’s behind this paradox?
According to the 2023 State of Women survey conducted by Principal Financial Group®, only 45% of women express confidence in their financial management abilities, while 58% of men do. Furthermore, just 22% of women consider themselves knowledgeable about investing, compared to 46% of their male counterparts.
These statistics can be discouraging but don’t capture the full picture. Men typically report higher confidence levels regarding finances and career choices. For instance, men feel more prepared to handle a recession and are more assertive in salary negotiations.
However, a lack of confidence doesn't equate to incompetence. Research indicates that women are often more effective negotiators and tend to make more prudent financial choices during economic downturns. Additionally, women frequently achieve higher investment returns than men.
Is it an issue that women feel less confident? Or is it possible that we simply don’t showcase our accomplishments enough? Perhaps not. As Taylor Swift might suggest, navigating the expectations set by men regarding self-promotion is exhausting. Let’s focus on cultivating our financial confidence while recognizing humility as a unique strength.
Fostering Confidence Through Time Management
Whether acquiring a new skill or embracing new work responsibilities, there’s often pressure to achieve immediate success. This pressure can lead to self-doubt when we lack instant results. The same can happen with finances.
“It’s essential to acknowledge that enhancing our financial literacy is a lifelong process,” says Teresa Hassara, senior vice president at Principal®. “You don’t need to grasp everything at once; it’s a gradual journey.”
In essence, developing our financial skills and confidence takes time.
One challenge? Carving out that time.
“Many women juggle busy schedules, balancing home, social, and work lives,” Hassara notes. “The key is to create small time slots to focus on what matters to you financially. Aim to set aside 20 to 30 minutes each week as your personal time to engage with finances, rather than seeing it as a chore.”
Seek Assistance When Necessary
We all want to feel in control of our finances, but it can be tough without a sounding board, according to Sara Zuckerman, a certified financial planner at Reset Financial Planning. Effective support can come from various sources, including trusted family and friends. However, when aiming for substantial goals, like retirement planning, it’s wise to consult experts. Understanding your progress is far more beneficial than fixating on a vague target like 'I need $1 million.'
Asking for help is not a sign of weakness; it showcases strength. It demonstrates a proactive approach to securing what you require.
To find the support you need, check if your employer offers a financial wellness program. If not, advocate for its introduction. Such programs often provide timely advice tailored to significant life milestones and ongoing support to help you stay on track.
“There are pivotal moments in life when a financial coach or mentor can clarify options and their respective pros and cons,” Hassara explains. “During these crucial times, having someone to guide you through the best choices is invaluable.”
Certified financial planners and therapists can also assist in navigating any psychological barriers you may face regarding money, Zuckerman adds. “If you struggle with confidence despite seeking knowledge, there may be deeper issues related to your money mindset. An expert can help unpack those feelings and create a personalized action plan.”
Embrace Humility as a Strength
While we never want to see women feeling undue worry or failing to acknowledge their achievements, a touch of skepticism can foster wise financial choices.
“Humility can motivate us to seek knowledge,” Hassara observes. “For many investors, overconfidence and hasty decisions can be detrimental. Those who take a long-term perspective and strive to understand the market gain an edge.”
Indeed, the 2023 State of Women survey found that 55% of women prefer to hold their investments during economic downturns, compared to only 40% of men. Trading less frequently amid market fluctuations can lead to better outcomes. Missing just ten of the best market days from January 2003 to December 2022—seven of which occurred during bear markets—could have halved your returns.
When you're less confident, you’re more inclined to ask questions, which can slow down decision-making in a beneficial way.
“Maintaining a healthy skepticism toward your limits encourages careful analysis before acting, potentially avoiding significant errors,” Zuckerman explains. “You’re less likely to fall for flashy sales tactics or impulsively adopt financial strategies you’ve seen online. The most beneficial approach to your finances is to invest time in understanding the rationale behind decisions.”
Discover additional strategies to boost your financial confidence at principal.com.
