AARP Survey Says Women Are More Likely to Face Financial Struggle
While nearly all adults will experience a crisis at some point in their lives, women tend to bear the brunt -- both financially and emotionally, according to the results of a nationwide survey released by AARP. Nearly two-thirds (65%) of the women aged 40 to 79 surveyed had already experienced a major life crisis such as job loss, divorce, death of a spouse, or serious illness or disability of an immediate family member or themselves, and in the vast majority of cases, the event had a significant impact on their finances.
"No one escapes the financial implications of a life crisis, but they are particularly acute for women," said Richard "Mac" Hisey, president of AARP Financial Inc. "The demographic considerations are obvious: women outlive men, so they experience more life crises and deal with the consequences longer. But women also tend to be the caregivers. That means women are frequently dealing with the human and logistical consequences of a life crisis, leaving little time and energy for the financial considerations.
"The findings relative to long-term job loss are particularly troublesome, given the state of the economy and the impact of job loss on women," Hisey said. "Unfortunately, job loss is one crisis that more and more Americans are experiencing."
The financial impact of life crises tends to be immediate and disproportionately borne by women. For example, in the case of divorce, 74% of women reduced their expenses (vs. 59% of men), 56% sold their home (vs. 44% of men) and 42% took a job or a second job (vs. 21% of men). Not surprisingly, the survey revealed that women are more concerned about their financial futures than men — and have cause to be. Sixty-one percent of women said that they are worried about having enough money for the rest of their life (vs. 52% of men) and 35% of women (vs. 28% of men) have less than $50,000 saved for retirement.
"The road to long-term financial security is already a difficult one for many women, and detours can emerge at any point along the way," Hisey said. "That's why planning for a life crisis and minimizing its financial impact are so important for achieving long-term financial security."
Emotional Impact Also Greater for Women
Beyond the angst many of us feel when dealing with financial matters, life crises can stir up additional emotional and psychological factors that complicate decision-making, such as denial, anger and regret.
"Even in the best of times, if money is involved, there are certain cognitive and emotional factors that can lead to decisions that are not in our best interests," said Warren Cormier, founder and president of Boston Research Group, and co-founder of the Behavioral Finance Forum, who consulted with AARP Financial Inc. on the study. "But life crises come with an additional layer of complications -- and, frequently, with a requirement to act."
Survey data revealed that dealing with emotions during times of life crisis is a particular challenge for women. Three out of five of the women surveyed said that it was hard to keep their emotions in check during a major life event (vs. 46% of men). More than four in ten women (44%) said they had trouble staying focused.
Their finances aren't the only aspect of their lives to suffer more than men's during life crises. Fifty-four percent of women (vs. 32% of men) said that long-term job loss had a very significant impact on their emotional well-being and 58% of women (vs. 46% of men) said the same of a spouse or life partner's serious illness/long-term disability.
"Life crises are the perfect storms of personal finance -- where the need for consequential and frequently urgent financial decisions meets an emotional hurricane," Hisey said. "This is a critical issue for women. The vast majority of women will be solely responsible for their finances one day, frequently assuming that responsibility at a time of tremendous personal duress."
"Complicating matters is that it can be hard to find good information and trustworthy advice on financial decision-making in times of life crisis," Hisey added. "As the survey showed, women are more likely than men to seek financial advice from immediate family members -- who are well-intentioned, but are not necessarily experts when it comes to finances."
Turning to Family for Financial Advice May Not Be Best Option
Understandably, many of us turn to family for emotional support in times of life crisis — the problem is that we stay there for financial advice.
Asked where they turn to for help managing the financial implications of a life crisis, immediate family was the number-one response for every life crisis, including divorce (cited by 59% of women and 39% of men), long-term job loss (cited by 61% of women and 60% of men) and death of a spouse (cited by 61% of women and 54% of men).
The problem is that while family and friends may provide emotional support -- a particularly important requirement for women -- they are not necessarily qualified to give financial advice. As evidence of this, 46% of women who had experienced a life crisis said it was hard to trust the financial information/guidance they were receiving.
On the other hand, while men and women alike rarely sought professional financial advice in times of life crises, those women who did felt very well served, even more so than men. Of the female respondents who sought professional advice in times of life crisis, 73% said they had a "very positive experience" (vs. 54% of men) and another 19% of women said they had a "somewhat positive experience."
"The fact that many people do not know where to turn in times of life crisis means that the financial services industry has not effectively communicated its care and concern," Hisey said. "As an industry we must do a better job of encouraging women to seek advice from financial professionals during life crises as immediate, expert advice can make a critical difference in families' finances for the long-term."
Creating Some Calm Before the Storm -- Financial Preparation
Many women who have experienced a life crisis felt unprepared to manage the financial consequences. More than half (54%) of women who had experienced job loss said they were at least somewhat unprepared to deal with the financial consequences, as were 46% who experienced the very serious illness or disability of a child, 40% who experienced the very serious illness or disability of a spouse, 34% who had experienced divorce, and 30% who had lost a spouse or life partner.
"Let's face it -- it's hard enough to contemplate some of these scenarios, let alone plan for them," Hisey said "At the same time, the reality is this: sooner or later, you're going to experience a life crisis. Just as with positive life events -- from marriage, to buying a house, to college, to retirement -- a little preparation can go a long way.
"Half the battle is getting the message out that that life crises can have a profound and enduring effect and that many women will one day be in sole possession of the family finances," said Hisey. "Therefore, it is crucial that we communicate to them the steps they can take -- before, during and in the aftermath of a life crisis -- to minimize the negative financial impact."