Kathy has $80,000 sitting in her bank checking account. She told me she likes “a cushion.” Helen has had $5,000 sitting in a band-aid box in one of her bathroom medicine cabinets for over 5 years. I like to have a stash of cash on hand in a secret place just in case there’s an earthquake or some major disaster. And I don’t think anyone would be brassy enough to go into my medicine cabinet.
Keeping large amounts of money in your bank checking or savings account or in a secret hiding place in your home is not all that different from keeping money in your childhood piggy bank. Today, most banks pay about 2% interest on the money you have in your checking or saving s accounts which is better than nothing.
In researching this topic, I was fascinated to learn why women shy away from investing money and instead are more comfortable with saving money in a bank account. Here’s what I learned!
Women like to hang onto their money and keep it in a place that feels “safe” to them. Bank checking or savings accounts are savings vehicles that women feel competent with. It’s not that different from a Christmas Club Account. It’s run on the same principle. It’s the kind of account a woman feels comfortable with, an account she understands and an account she can easily put her hands on. A savings account’s purpose is to allow you to withdraw money whenever you need it. Savings accounts are perfect to keep your money in if you need fast cash. I would suggest that every woman have access to a quick $1000 cash and can keep that cash in a bank savings or as a cushion in her checking account.
Investing money is different than saving money. The purpose of investing money is to have your money grow. Investment accounts make your money work for you! Usually with investments your money is tied up for a minimum of 5 years. So, it’s not easy to get your hands on it without some penalty.
Women are afraid to invest because they fear they will lose their money. Most of this fear is because women don’t understand how to invest. Their lives are too busy to learn. Ruth Hayden, author and financial educator tells us, A woman doesn’t have to be an expert at investing; all she has to do is to hire an expert to help her invest.
Ruth gives three guidelines for women to consider in hiring an expert to help them.
- Step One: Network! Ask everyone you know, Whom do you know who works with investments? Start taking down names. When you begin to hear the same name from different people, this is an important name to remember. Women are excellent at networking to find the best hair stylist, therapists or interior designer. Apply that principle to finding yourself an investment advisor!
- Step Two: Set up a phone interview or meet in person with five different financial advisors. Talk with them about how they work and how they charge. Compare them and go with your gut feeling. Use your woman’s intuition about who is best for you. Observe whom you best “connect” with and go with that person.
- Step Three: Assess your investment advisor’s teaching style and see if it matches your style of learning. This means that your new financial advisor needs to speak in the language you understand. They need to break down the financial jargon so you can understand exactly what is being said. Your advisor needs to be able to explain what risk means as well as all the ways available to invest your money and watch it grow!
It is mandatory that you either learn to invest your money yourself or hire an expert. If you don’t invest, then the only money you will have over your lifetime is money that you earn from working. When you do nothing with your money other than keep it in a “safe” bank account, your money actually loses value over time. Taxes and inflation devalue your money, so your dollars are worth less tomorrow (and the tomorrow after that) than they are today.
Remember, making your money work for you is a whole lot better than working hard for your money!
