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- I got a great financial education from my parents, who were always very open about money.
- However, because my mom typically handled budgeting and taxes and my dad handled investing, I absorbed a subconscious lesson about gender and money - that investing is men's terrain.
- After a conversation with a friend, though, I realized I could manage my own portfolio just fine - I'm a personal finance writer, after all - and since then I've been handling my investments and helping my friends with their own.
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I grew up in a very financially open household. My parents had no problem talking about their debt, income, and all the other nitty-gritty details most people choose to keep private.
But while they talked about everything, each of my parents had their specific responsibilities. My computer-programmer dad handled the investing, while my CPA mom handled budgeting and taxes. That division shaped my worldview on how gender should influence household finances.
So when the time came to start building my own nest egg, I turned to my dad for advice. It wasn't until years later that I even considered making my own investing decisions.
The conversation that opened my eyes
My friend and financial expert Stefanie O'Connell Rodriguez and I were at FinCon, a personal finance media conference we both attend yearly. I was gushing about how many female bloggers and writers were at the conference when Stefanie made an interesting point. Most of those writers focused on budgeting or frugal living, but few wrote about investing.
"Why is that?" she asked.
I was stumped. I didn't write about investing either, on my own blog or for my freelance clients. I just didn't feel knowledgeable enough about the topic, telling myself it was better left to experts like financial advisers.
Stefanie pointed out that not all men writing about investing were financial planners or registered investment advisers. She mentioned a Hewlett Packard report showing that women only apply for jobs when they consider themselves 100% qualified, where men only need to feel 60% qualified to apply for the same job. Women minimize their knowledge and experience where men don't.
I immediately started to feel defensive. I've always considered myself a fearless person, but investing scared me. Stefanie made me realize how afraid I was and how that fear was holding me back.
I hard started investing by that point, but my decisions were based on my dad's recommendations. He loves to read investment blogs, newsletters, and books. Every time I see him, he tells me about a new fund or stock he's putting money in.
I didn't have that same passion. Investing terminology scared and confused me. I knew investing was crucial to financial success, but I didn't want to dive in and start learning from scratch. My dad's portfolio seemed to be doing well enough, so why not just continue following his lead?
My investing education
After my conversation with Stefanie, I decided to face my fears. I had recently learned about the concept of learned helplessness, where a history of avoiding a particular topic leads to a sense of powerlessness or aversion. This seemed like a perfect opportunity to explore that idea.
I started by reading investing articles in Kiplinger's and Money magazine. I already subscribed to those magazines, but I'd always avoided the investing sections. I also started reading more books and blogs about investing.
When I started taking my investing education seriously, I realized how much I already knew. Like Stefanie had said, I was downplaying my knowledge. As I kept reading, I learned even more. When I got to a word or phrase I didn't recognize, I would look it up like a child learning to read.
I also met with a financial planner. Now that I had a better handle on investing, I wanted an objective third-party take. He gave me some valuable insights, answered my questions, and explained how I should structure my investments going forward.
After months of reading, I realized investing was easier to understand than I thought it would be. It was like any other skill or language - once you grasp the basic terminology, everything starts to fall into place.
I assumed I wasn't smart enough to understand investing on a deeper level, even though I had never really tried. Once I delved into the topic, I realized that it wasn't as complicated as I'd imagined. That's the very essence of learned helplessness ‚ and how to get over it.
Why understanding investing matters
When it comes to investing, women still lag behind men. According to a survey from robo-adviser Wealthsimple, women are 40% less likely to invest. They're more conservative with their money, too, and more afraid of losing it. They're good at saving, but they often keep their cash in a savings or checking account.
When you know how to invest, you can put your money to work through the power of compound interest, i.e. when the money invested accrues interest, and that interest starts to make more interest.
Take my friend Martha for example. A couple of years ago, Martha mentioned that her IRA was barely growing. The market was doing well at that time, so I asked about her investments. I assumed her money was all in bonds instead of stock funds.
What I found out was much worse: She hadn't actually invested the money in her IRA. She had transferred money from her bank account to the IRA, but hadn't actually purchased any shares of mutual funds or stocks. Because my friend didn't understand the basics of investing, she lost out on five years' worth of returns in the stock market.
The only way to build true, lasting wealth is by taking what you've earned and using it to build on your success. Women tend to live longer and earn less than men, so it's even more crucial for us to learn these skills.
It's not enough to just throw money at a portfolio. Like with most skills, a basic understanding of the topic is the first step to continued success.
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