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No matter what strides have been made toward equality, many women’s attitudes towards financial planning remain outdated. Here are some basic investment lessons to empower women with financial peace of mind and to help build a foundation of financial literacy.
If your background isn’t in finance, your knowledge of investing, the stock market, and asset diversification might be very limited. Confusing at best and overwhelming at worst, financial planning is an unavoidable part of life. Long-term financial independence depends on how you navigate your high earning years.
Men have long been in charge of setting the household budget, negotiating big purchases, investing, and saving for retirement. However, people are getting married later in life, and many women are not taking a proactive approach to future financial success. Or, on the other side of the coin, they find themselves unprepared for handling their finances after a divorce.
The TL;DR is all about finding the right financial products, diversifying assets, and saving money (but in a way that doesn’t feel so taxing—more on that later). None of these are easy tasks. They require a mix of education and creativity to find strategies right for your lifestyle, with the appropriate combination of risk and consistency to see you through.
As of January 20th, 2021, an American Express® High Yield Savings Account, member FDIC, has an Annual Percentage Yield (APY) of 0.40%. With above-average return rates and consumer-friendly features, American Express® High Yield Savings Account ranks as one of the best online savings options. There are zero maintenance fees and no minimum balance requirement. It’s easy to set up an American Express® High Yield Savings Account. In fact, it only takes a few minutes. Plus, it’s easy to access your money, with up to nine withdrawals a month. You can also maintain multiple accounts, so it’s easy to move money between them.
It’s hard to understand why saving money alone isn’t the end all be all to creating long term wealth. You’ve probably heard that putting all your financial eggs in one basket isn’t a wise thing to do. Aside from opening an American Express® High Yield Savings Account, allocate a portion of your wealth to diversification. Below is a list of some of the main categories of savings and investment products to consider when looking to diversify. Each option comes with its own set of risks and rewards, so make sure to research what is right for your lifestyle and determine the amount of risk you are comfortable with.
Don’t just accept your primary bank’s offering for savings, shop around and find the right savings account plan. You can find better deals online. Without branches, online banks are more capable of offering higher rates on savings accounts, which is also how they attract new customers.
While some of these are familiar terms, they might not translate to today’s economic environment. For example, our grandparents used to put their money into Certificates of Deposit, which used to return at a higher rate than they do now. CDs also require minimum deposits and a period of months or years where you can’t withdraw your money without penalty.
While choosing to put your money in products like CDs and high-yield Money Market accounts feels like a low-risk choice, they present a different type of risk, as they may not earn enough to keep up with the rate of inflation. And if your money is sitting in a safe traditional brick-and-mortar bank it’s earning little to no interest.
I am a bit like Veruca Salt from Willie Wonka and the Chocolate Factory. I want what I want and I want it now. As you can imagine, saving money when I was still living paycheck-to-paycheck was hard. So instead of the line item approach to budgeting x amount to clothes and shoes and x amount to food and drink, I went with a top-down approach.
Each month I would stick to only spending a certain amount of money outside my fixed costs. So if I had $1K of discretionary income to play with I would still make my whim purchases on a fabulous pair of shoes, and then cook pasta at home or proactively invite friends over for game night so I wouldn’t have FOMO of not being able to go out on a weekend. This worked way better than trying to budget out every dollar spent.
One of the advantages of aging is having insight into what’s really important to spend money on and what’s not. In my 20s, living in Manhattan on an intern salary meant meeting my friends for drinks after their expensive dinner. Instead of spending money on a trendy dinner, I could have a Lean Cuisine at home. My waistline and my wallet were winning. Now that I’m in my 30s, I’ve recognized my spending triggers and have done my best to avoid them.
Target is my kryptonite for following a budget. The magic of Target is that when you walk in with a modest list, you can exit with enough stuff to redecorate half a house. When saving for a big trip or another big-ticket item, I’ve made a point to avoid Target like the plague. Many other budget stores carry almost everything Target does without the collateral damage of perusing the aisles of throw pillows and bathing suits.
Aside from this life/budget hack, I do my best to communicate to my circle of friends when I’m following a budget. This cuts down on social invitations that serve as a gateway to cheating on my budget.
As we as millennial women approach our high-earning years and are better positioned to start saving money in a meaningful way, don’t expect saving money to be one-size-fits-all for life. The past decade has left me with a mix of practical anecdotal advice for budgeting. Now I’m combining experience with research on the best financial tools. Dabbling in the diversification of assets has proven to be both empowering and infectious. Don’t be scared to be more proactive when it comes to financial planning for you and your family’s future.