Take Five: Chatzky on Women with Money
Financial expert Jean Chatzky will visit Madison on July 23 for a smart-money talk with UW Credit Union members at the Edgewater Hotel.
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Jean Chatzky, the award-winning financial editor of NBC Today and best-selling author of 11 books, launched HerMoney Media and and HerMoney.com in 2018 to provide women with information about money they can actually trust, but she didn’t stop there. Her current focus is on the financial empowerment of women, tied into her newly published book released in March titled "Women with Money: The judgment-free guide to creating the joyful, less stressed, purposeful (and, Yes, Rich) life you deserve." IB's Joe Vanden Plas spoke to Chatzky by phone this past week in advance of her July 23 smart-money talk in Madison.
IB: I was struck by one statistic in particular in the introduction related to how much intergenerational wealth women are about to inherit — roughly 70 percent of the $41 trillion expected over the next 40 years. I was aware that women make the vast majority of purchasing decisions for families, but the intergenerational wealth transfer caught my eye. In the research you’ve done for "Women with Money," what future trend stood out most to you and what does it portend for the future?
Chatzky: I was inspired to write the book at this point because even though we haven’t closed the salary gap [between men and women], it is clear that there is a lot more money that will be flowing into the hands of women thanks to those intergenerational trends that you mentioned, but also educational trends and the fact that more women are becoming the primary bread winners for their families. So, you add it all up, and women will be controlling a lot more money, and yet we don’t feel ready for it in many, many ways.
IB: In what ways are we not prepared for this. In terms of how to build wealth?
Chatzky: How to build it. How to invest it. How to make sure that we use it to create the lives that we want. Those are complicated lives filled with big goals — starting businesses, buying homes, building a legacy, supporting our communities, giving back, and investing to build wealth. Those are things for which not all of us feel we have all the information that we need, so that’s why I wrote the book.
IB: You note that a woman’s financial playbook should be different than the one that men have traditionally followed. Why is that?
Chatzky: Women have had less and earned less — and still do — for many, many years, and they live longer. And we’re the ones who take breaks from the workforce to care for kids and care for older parents, and what that means is when we end up at retirement, we’ve got less money and then we need it to last an average of five years longer than men do. That requires strategy. Women have also been more risk-averse, and if my research is any indication, we are still in many cases more risk-averse. When I asked women what they wanted from their money, the very first answer in most of the cases that I documented was safety, security, and stability. The irony is that if you are focused so much on building a fat savings account, that can get in the way of financial security because money in the bank is not earning a ton these days. In fact, it’s not earning much at all.
IB: In fact, you actually fall behind, all things considered, when you factor in the impact of inflation and so forth.
IB: What's the most impactful money mistake people make, the one where a correction would make the biggest difference in their ability to build wealth?
Chatzky: Not saving enough and not prioritizing saving.
IB: Why does that happen? There is so much information out there about how important it is.
Chatzky: Yeah, we get in our way a lot. Human beings are not wired to save, necessarily. As human beings, we’re wired for immediate gratification rather than delayed gratification, which means it’s a lot more fun. It can seem a lot more important to do the things that are happening right in this instance rather than to save for tomorrow. That’s why it’s so important to use the tools that are available, like the advances in behavioral finance, to help us.
IB: What’s your advice to women and men about money wisdom in a strong economy that’s being undermined by the uncertainty of a trade war with China?
Chatzky: My advice is always focus on your own personal economy. I can’t control what is happening in Washington. I can’t control what’s happening overseas, but I can control how much of my own money I save. I can control whether I ask for a raise on a regular basis or whether I’m making an effort to make sure I’m earning up to my potential. Although it is very tempting to focus outward, where you have control is what you do with your own money.
IB: You also address how much people should save — about 15 percent of what they earn. To what extent do people still underestimate what they will need in retirement, especially given the rush we all get from what you call “The Joy of Spending?”
Chatzky: People underestimate that quite a bit. Social Security only covers, on average, about 40 percent of what people need in retirement to replace their pre-retirement expenses. If you look at the statistics about how much people are saving and have saved, it’s way below that.