April is Financial Literacy month. Unfortunately, Americans are lacking in this area. Our schools do not teach the subject in depth, and as a result, many families face more stress and have living standards that are lower than necessary. Financial pressure is a major reason leading to divorce and family discord. Financial literacy is important for all families no matter economic status.
Although lack of financial literacy hurts all people, it is probably even more important to women. Women often carry more financial burdens than men for a number of reasons. Women are often the caregivers. They take on more responsibility for their children and for their parents, which requires a lot of time. It sometimes reduces the amount of time spent in the work force to build up Social Security benefits, pensions, promotions, and 401k balances. Sometimes this results in lower pay and benefits at work.
Currently, more women than men are attending college. While this is promising for future income, women also now hold two-thirds of student debt for several reasons. When they enter the work force, they often are paid less so it takes them longer to pay off loans, costing more in interest. Women should be paid the same amount as their male counterparts for the same job.
Divorce is a situation that affects many American families. If a lack of money is a major cause of divorce, operating two households costs more than operating one. If both spouses had not been involved in financial decision making, it becomes a major concern during a divorce.
The loss of a spouse is rough on everyone. In addition to the emotional issues, the financial ones can be devastating. More often it is the female who loses her spouse. This is because they often marry a man a few years older and women of the same age often live four to six years longer than men. Upon the first death, almost every family suffers a loss of income. One Social Security benefit will be lost and possibly some pension income. Most survivors get 50% of the original monthly income from a pension. While the income takes a big hit, living expense do not reduce in half. In fact, they probably drop only about 15%. This is because you still must pay property tax, utilities, repairs and many other expenses no matter how many people live in the house. You may even have to hire someone to do the chores that were done by the spouse. Tax rates also increase dramatically for the same amount of income when filing a tax return as a single rather than married filing jointly.
Studies have shown that a 65-year-old couple will spend about $240,000 in health care expenses in the final phase of their lives. Women will account for about $130,000 of that total. Part of these expenses is a result of longer life expectancies. This figure does not include long-term care expense. If you visit a nursing home, about 85% of residents are women.
Decisions made decades earlier can have a major impact on later life. Knowledge is power. Take steps to improve your financial literacy and your family will be rewarded for years to come. The benefits will be well worth the effort. We will discuss some other way to increase your family’s financial literacy in future columns this month.
Your Financial Future is written by certified financial planner Gary W. Boatman, MBA and CFP.
who also wrote the book, “Your Financial Compass: Safe Passage Through The Turbulent Waters of Taxes, Income Planning and Market Volatility.” If there is an area that you would like to see discussed in the column, send your suggestions to gary@BoatmanWealthManagement.com.
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