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Family Finances

How A Generation Gap Impacts Finance For Women

Personal finance needs vary greatly across generations — but perhaps even more so for women.

Articles by sherrillstgermain

By Sherrill St. Germain
Financial Columnist, Betterment  |  Published: June 6, 2019

Women’s personal finance needs can vary as much across generations as they do across gender lines.

Some of this “generation gap” is the natural outcome of being at different ages and stages of life, but shifts in cultural, societal, and economic norms have exacerbated the effect.

The money choices a grandmother of the Silent Generation made probably won’t suit her Boomer daughter or Millennial granddaughter. However, powerful new solutions designed for today’s world can help them meet their financial goals, provided they make the most of them.

When the topic of “women and money” comes up, the focus is usually on the gender gap. Much has been written about how women have to overcome wage disparity, the “pink tax”, risk aversion, and longer life expectancies to achieve their financial goals. But, these common focuses ignore a potentially larger gap: How women’s financial needs vary from one generation to the next.

Some of this “generation gap” is the natural result of being at different stages of life. The role of women in the family, the workplace, and society has evolved so much that what worked in Grandma’s day may no longer even be an option for her daughters and granddaughters. To understand this better, let’s look at a hypothetical family.

A Millennial’s Financial Circumstances

The countdown to her 10th high school reunion is on. It’s three months out, and her phone is flooded with group text messages about travel details and plans for that weekend. One friend in the group suggests making a reservation at an upscale restaurant near the venue for dinner before the reunion begins.

There’s just one problem: She’s still paying off last year’s round of bridesmaid duties. That, and not so long ago she was laid off from her full-time job. She’s patched together side hustles as a tutor, dog walker, and rideshare driver, but that income barely covers rent and food, much less health insurance, college loans, or expensive dinners with friends.

Her emergency fund is almost gone, and none of her options look good. She considers tapping into her 401(k) instead of using a credit card, but her money-savvy friend warns her about the long-term folly—and short-term tax implications—of doing so. With the possibility of moving back in with her mom looming large, the timing on her reunion couldn’t be any worse.

Considerations for the “baby boomer” mom.

Her mom is celebrating a reunion this year herself: It’ll be her 40th high school reunion and the first one she’s been to since divorcing her high school sweetheart.

They started off as the 50-50 partnership she and her classmates idealized: Dual incomes, common goals, and shared financial responsibility. Then kids came along. When her dad died, her mom needed a lot of support– so she quit her job.

Before long, they found themselves in surprisingly traditional roles. She took over the monthly bills, he made the big picture decisions. Squeezed by their “sandwich generation” duties, talk about money fell by the wayside. It was only through the divorce proceedings that she discovered how little money and savings they had.

Now she’s picking up the pieces. Mom is back to full-time teaching and she’s thrilled to be beefing up her pension and 403b. But, thanks to her years out of the workforce and paying for her child’s higher education, she’s got a lot of catching up to do.

How does she begin to balance everyone’s needs? Should she sell the now too-big family home? Will she ever retire? Can she afford to hire a financial planner? Can she afford not to? Even though her new job provides her with some financial stability, it’s a far cry from the future she and her high school friends envisioned.

A grandmother’s financial obstacles.

The matriarch of the family only wishes she were well enough to make it to her upcoming 75th high school reunion. Due to various health issues, she’ll be spending time indoors instead of reminiscing with her few remaining classmates.

Together they survived the Great Depression, World War II, and the many boom and bust cycles that followed. Times were often difficult, but they got by. No one had credit cards or financial planners. They simply spent less than they earned and saved in advance for big expenses.

She remembers her young husband surprising her with their new home. It wasn’t until he died decades later that she discovered it cost the then-pricey sum of $5,900. That’s the way it was: men handled the money, and that was fine by her. She grew to love that home, and it grew to be worth a hundred times its cost.  The equity is what allowed her to live there.

But how much longer can it last? Is it time to move to assisted living? Can she afford it? What about the kids’ inheritance?

Progress For Better

It’s true that most women share financial concerns unique to their gender. However, as illustrated in this scenario, those concerns can vary tremendously across generations. Even within generations, women’s needs are by no means monolithic. Where once there were prescribed roles and paths outlined for women, the choices are now virtually limitless.

Personal finance is evolving in parallel. Yesterday’s safety nets are being supplanted by sophisticated products and planning strategies. The safe, reliable pensions, bond ladders, and comprehensive health insurance of old are giving way to new, more flexible tools of the trade, such as 401k’s, Health Savings Accounts, and long term care insurance.

Grandma couldn’t get a credit card in her own name until 1974; in comparison, her granddaughter could have one at her eighteenth birthday.  She might also even have her own Roth IRA and 529 accounts. And, there’s a good chance a robo-advisor is making investment decisions on her behalf.

The bottom line: gender gap notwithstanding, today’s woman has all the power to make — or break — her financial future, even though effective use of this power requires much greater financial acumen than generations past needed. Lean into the women-focused personal finance resources that exist.

If you decide to seek advice from a professional, be sure that person (and the firm they represent) are considered fiduciaries and are obligated to act in your best interest. Certain online investment platforms hold themselves to this standard and may be a good jumping off point for free educational content and ultimately investment options.

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