Did Mom Miss Out on this Important Gift?
May 13, 2013Yesterday, Americans spent nearly $20 billion saying thanks to mothers across the country for their priceless roles as domestic CEOs. Hopefully, you had an enjoyable Mother’s Day weekend and had the opportunity to celebrate with the moms in your life too. While my son and I were making our special recipe of blueberry explosion pancakes in the kitchen for my wife (well, I was primarily trying to minimize the mess he was making out of love for his mommy), I started thinking about my memorable Mother’s Day gifts of the past. As a child, I’m sure there were more than just a few kindhearted but lame attempts at breakfast in bed, homemade cards, flowers, and gift certificates. Even as an adult, I still struggle to find the best gift for my mom and I am sure that I’m not alone when I say that it’s tough to find a substantive gift that adequately says thank you enough. (However, I did come across this open letter to moms everywhere from Kid President and it’s sure to make some moms smile in realizing how awesome they are!)
Now that another Mother’s Day has come and gone, did your mom miss out on the important gift of financial security? If so, it’s never too late to have a meaningful discussion about her financial plan and to help her navigate often difficult financial life decisions. In a recent blog post, Eleanor Blayney, CFP®, the CFP Board’s consumer advocate and Financial Finesse guest blogger, provided a wonderful summary of the things that mothers should be doing to improve their financial security. Here’s a highlight of some simple yet important things that mothers can do to improve their financial futures:
Create a savings plan for retirement and for emergencies. It is essential to put savings first in the budget and to automate savings through payroll deductions to a retirement savings plan or direct deposits to a savings account that is separate from the day-to-day checking account. (Perhaps the hardest guidance for mothers to accept is to be a little selfish and place retirement savings ahead of saving for a child’s education.) Sometimes it’s hard to find extra money in your personal spending plan, but it never hurts to look.
Get adequate disability and long term care insurance. As our CEO points out in a previous Forbes post, you’re 3.5 times more likely to become disabled than to pass away prematurely. With motherhood, women are already more likely to miss time at work, but any unexpected absences due to disability can potentially be devastating. The LIFE Foundation provides some easy-to-use calculators and supporting resources to help assess the need for disability insurance.
Similarly, the need for adequate long-term care insurance (or in some cases self-insurance) is also significant with 69% of all people needing some type of long-term care once they reach age 65. But you shouldn’t wait until age 65 to obtain long-term care coverage because it may be too cost prohibitive or unattainable by that time. Check out this Forbes post on “Demystifying Long Term Care” for more information on how to determine the best way to take control over the potential need for some type of long-term care.
Consider taking on more investment risks. When it comes to investment risk tolerance, women have consistently proven to be more conservative as investors than men. But being too conservative can potentially hurt their retirement plans since they need to make their wealth grow for a longer period of time.
The first step in creating an investment portfolio that will meet short and long-term objectives is to assess your tolerance for risk. However, our research has identified that less than 40% of women have completed some type of risk tolerance questionnaire as compared to almost 60% of men. There are many risk tolerance questionnaires out there so it’s best to take at least 2-3 risk profiles to assess your comfort level for risk (see this investor quiz, Vanguard’s, or Financial Finesse’s for examples). Once you know your risk tolerance, it is easier for novice investors who prefer taking a hands-off approach to build a properly diversified investment portfolio with the surge in popularity of “one stop shops” like target date funds.
Seek ways to increase financial knowledge through education. Financial educators across the nation are on a mission to help empower women to learn more about managing their personal finances and to change their financial behaviors with confidence. A growing number of companies are now providing unbiased financial education services as an employee benefit. If you or the mother in your life has some type of financial education available at work or through a community organization or local credit union, take advantage of the opportunity to learn. Then the fun part begins, turning knowledge into action and creating meaningful change through a financial life plan!
Finally, I always tell people who lack confidence in their own financial knowledge to seek out someone with the heart of a teacher and the patience of a trained counselor. Pushy product-focused salesmen with their own self-interests in mind need not apply to help moms (or any other person in need of help with financial planning). If you are seeking the guidance of a financial professional, you can search for advisers at letsmakeaplan.org, NAPFA and the Garrett Planning Network and learn more about the important questions to ask to determine if their guidance can help your situation here.
The best gifts in life are often priceless memories and experiences. For mothers everywhere, the gift that keeps on giving beyond Mother’s Day is one of financial security and that is something that can be challenging for people who spend the majority of their time putting the interests of others first. The good news is that the journey to financial freedom is attainable through increased knowledge and a few small steps in the right direction.