Women are the next major global economic force. All over the world, women’s economic contribution to households has increased: in 1976, one in twenty women were the sole breadwinners in their households; by 2013, it was one in four; and today, women are breadwinners or co-breadwinners in nearly two-thirds of families with children.
And yet, we’ve witnessed how the pandemic and other socio-economic forces continue to be a barrier for women trying to reach their full economic potential. Women continue to shoulder most of the responsibility of running a household even if they work outside the home, face income equality in their professions, and lack support from their families and the community when they take risks. Today, the women’s wealth gap is far greater than the income gap. While women earn about 79 cents on the dollar compared to men, they own only 32 cents; and women of color own only pennies on the dollar compared to white men and white women.
This trend is a critical component in the movement to build generational wealth in marginalized groups. Women’s access to jobs or businesses, savings, and investments, plays a large role in the well-being of the future generation. This in turn impacts the community and the financial prosperity of a country. To build financial wealth (or to help the women in your life build generational wealth), follow the steps below:
Practice financial self-care
It’s never too late to get on the financial well-being bandwagon. For example, if you’ve managed to get through your 20s or 30s without a budget, it’s still a good idea to spend some time creating a budget that works for you. This can then lead to a solid foundation for your financial strategy – before you even jump into investing – have a clear understanding of where your money is going today, and if possible, consider if there are opportunities to save or invest more.
Additional steps to take:
- Create an income statement. Take inventory of your monthly sources of income, and list all of your expenses. There are many budgeting apps and software that help you do this automatically, like Mint and YNAB.
Be honest with yourself about your discretionary expenses. If you are spending more than what is coming in on a monthly basis, then have a look at what you might be able to cut back on. If you have excess cash, this can be an opportunity to save or invest – more about that later.
- Maintain an emergency fund. The pandemic and its impact on jobs and the stock market has highlighted the need for individuals to maintain an emergency fund in cash. Depending on how risky your job is, if you are the primary earner, and other factors, try to have about three to six months of spending in an emergency fund.
- Address your money triggers. Sometimes self-care includes doing some deep work about your own insecurities and triggers. Address money habits that have been hindering your financial success. These habits are likely a result of years of conditioning through your upbringing, your environment, education, profession, and more. ome of the deeply rooted habits may be hard to break initially, but understanding the long-term consequences of not breaking them—which may include having to work for longer, or having to depend on others financially—could help you get the motivation you need.
Invest in yourself and your family
Reflect on the things that have been holding you back from saving and investing more money for your future. Are there any professional designations you can go for to get a raise at work? Do you tend to miss out on networking opportunities because you hesitate spending money on tickets and dinner events? Do you scoff at people who go for personal trainers, life coaches, or self-help books? It may be time to meaningfully invest in ways to supercharge your career or business.
There are only so many expenses you can cut out from your budget, but focusing on the income portion of your finances can encourage an abundance mindset. It will also help you build enough wealth to pass on to the next generation.
If you have children, establish a 529 education fund account and fund it when you can. For example, every birthday, Christmas, and holiday that your child gets money – at least 50% of it should go into a savings vehicle. Think about what it would mean to you if your parents had the ability to fund your college education. This single action could have a tremendous effect on your financial future. Instead of playing catch up to pay down your student loan debt, you could be saving for your first home or your future retirement. This is a gift you can give to your children.
Prioritize retirement savings, if possible
Women tend to put the needs of other people above their own. However, it is extremely important to build retirement savings as a priority – retirement planning is at the core of any successful financial strategy. Today, more than half of Americans are concerned about outliving their savings. For women, this anxiety is even more magnified, given their (on average) longer lifespan and a higher likelihood of career interruptions.
If saving for retirement still feels selfish, think about it this way. If you don’t plan for retirement, you may have to rely on your children or other relatives in the future, or you may not be able to pass along an inheritance to give your beneficiaries a leg up.
The best way to start building up retirement savings is to try to contribute the maximum allowable amount to your employer’s tax-deferred retirement plans, if you have access to a plan. If not, make it an urgent task to open up an IRA account through your bank (they usually will walk you through everything you need to know to start saving). This is extremely important for female generational wealth builders – you can’t help other people without first making sure your immediate needs are taken care of.
The stock market, along with other revenue generating assets like real estate, is a great way to build wealth over the long-term. When you invest your money, you are taking on some risk with the potential for those assets to continue growing for decades.
If you’re a stock market beginner, the best place to start is with low-cost index funds. These funds can offer low fees and long-term growth. There are many robo-advisor platforms, including Ellevest that focuses exclusively on bringing more women into the stock market, which make investing easy and quick.
Real estate is another major way to build wealth for the long-term. Real estate investments offer the potential for steady cash flows in addition to increasing values over time but do require a longer-term investment horizon. Lack of capital for a down payment used to be a serious deterrent for most women to start investing in real estate, but that is no longer the case. REITs and real estate crowdfunding platforms eliminate the need for tens of thousands of dollars of cash outlay.
It is not enough to just build wealth, we must also protect it and ensure that it reaches the next generation in order to start making a real impact. Estate planning helps you determine how your assets will be dealt with after you pass away, and ensures that your loved ones aren’t left scrambling to figure out details or taking on debt after your death.
Estate planning is for everyone, and your plan should be updated once a year at a minimum to ensure that you are effectively controlling and protecting your legacy. Here’s our article on creating and updating a will, which should get you started on estate planning.