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Money decisions by women will shape the future for the U.S.

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One of the biggest financial shifts in recent years is the rising economic power and management of women. Bottom line: The U.S. is seeing increasing wealth generation and management by women.

Over the last decade, one of America’s most important financial projects has been closing the gender gap. To date, women earn just 79 cents for every dollar earned by a man.

Although the gender gap is shrinking, quantum changes are occurring not just at work but in households as well. These shifts affect how money decisions in modern times. This massive change over the next 10 years will reshape the way we think about money as women will shape the future of the U.S. with their money decisions.

Today’s women hold more than 10 trillion dollars (or 33%) of the total U.S. financial assets. In the meantime, a record amount of assets, or $30 trillion, will be transferred to the U.S. by women in the coming three-five years.

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Why? Why?

It is an enormous wealth transfer that reaches the U.S. annual gross domestic product.

To get the views of other members of CNBC FA Council, I reached out.

Blue Ocean Global Wealth CEO Marguerita Cheng stated that although this is an enormous transfer of wealth, most women will inherit it because they live longer than men. It’s clear that women are not following the business model of “business as usual” because they have more control over financial decisions.

This is why it’s important and should you be concerned.

Women will make the largest number of decisions for your business in years to come, whether you’re a consumer product company, financial service company, or in real estate sales. Attracting and keeping female customers is a key growth factor for your company.

Businesses of any size need to understand how women spend their money and what they want.

As women make greater financial decisions for their families, so do more women. According to Fortune magazine, women lead the way in ESG investing (environmental, social, and corporate governance).

In general, a higher percentage of women are interested in ESGCFP Cathy Curtis CEO, Curtis Financial Planning, stated that women are more likely to invest than men. An investment news study by Calvert and Investment News showed that ESG fund use is on the rise at 25% annually. The trend towards ESG investing in women is even more prominent, with 53% of them doing it currently.

Curtis stated that the Covid-19 epidemic has highlighted our inequalities in financial and healthcare systems, as more people who are disadvantaged or poor lose their lives and jobs. ESG investors were primarily focused on the environment, but social and governance are now critical, and they drive the inflows to ESG products.

She said that as women inherit more wealth and make investment decisions, it is likely more money will be invested in ESG and impact investing.

With women choosing financial decisions that will have long-term effects on the society, environment, and business performance, both small and large corporations must step up to address social issues like climate change, racial, gender inequity, and justice.

Businesses that prepare for the transition of wealth to women could see four-times faster revenue growth, according to a McKinsey & Co. report.

Cheng explained that understanding a woman’s financial needs, desires, and behaviours will be a challenge for businesses.

Women are responsible not only for the family’s income but also manage the finances and make most of the financial decisions.

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To that point, nearly 9 in 10 women who are married or live with a partner said they are involved in spending and investing decisions in their household, up from just 42% in 2012, according to a recent report from Hearts & Wallets, a consumer research firm.

“One financial decision that women will make that will shape the next decade is deciding to participate and contribute to their company 401(k) plan or save to an individual retirement account if they are not working but have a working spouse,” said CFP Shannon Eusey, CEO of Beacon Pointe Financial.

Recent TransAmerica Center Study revealed that 32% of women do not expect Social Security as their primary source for retirement.

Eusey stated that the decision of making this save in themselves will determine their future decade for two reasons. The habit of saving is itself a form of compound growth and it creates a habit.

You can build a good habit of saving money and live within your means by putting a percentage of each paycheck in a 401(k), or IRA. Although it is possible to save a modest amount at first, this can add up over the years. Any raises will also help you save more. Second, invest the money once it is in your account.

All baby boomers are expected to be 65 years old by 2030. On average, women outlive men five years. Winnie Sun (managing director, Sun Wealth Partners) said that Covid-19 is still a major part of people’s lives. “The pandemic has highlighted the importance to be prepared for anything,” added Winnie Sun.

Sun stated that women are now leading financial discussions in many homes. It’s high time for us to talk about the need to have an emergency fund, financial first aid kits, and a plan in case you lose income. Sun also stated that when parents become ill, they need financial and emotional support. Most of the time women handle these needs.

Times are changing. Financial services businesses and financial institutions will have to adapt and be committed to meeting the needs and preferences of female customers and clients as wealth moves into women’s hands. 

— By Ted Jenkin, CFP and CEO/founder of oXYGen Financial and a member of the CNBC FA Council

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