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In a year when we should be celebrating the 100-year anniversary of women’s suffrage and all the economic gains made as a result, many women find themselves worried and wary about the future. That’s because, in more ways than one, women are bearing the brunt of COVID-19’s economic impact and that is bound to have ripple effects for years to come.
At the depths of the crisis in April, nearly 12 million women had lost their jobs compared with 10 million men. Most of those jobs were in education, hospitality and retail. In fact, at the end of April, job losses for women had erased a full decade of employment gains.
While there’s been some recovery since then — after four straight months of job gains from May through August, 7.5 million women have returned to work — many workers are worried about the stability of those jobs should the number of cases surge in the fall and winter.
And then there are the voluntarily job losses.
With school closures this past spring, summer camp cancellations and distance learning — or some hybrid of it — being the model of choice for the 2020-21 school year, a growing number of women — many of them high earners — are leaving their careers voluntarily to become a full-time parents and at-home teachers.
Women-owned businesses have also been disproportionately impacted by the pandemic.
A recent National Bureau of Economic Research working paper examined how the pandemic has affected small-business owners. The study found that female businesses were especially hit hard by COVID-19 as the number of female business owners dropped from 5.4 million to 4.0 million in just two months.
This steep decline of female business owners coupled with widespread job losses will inevitably result in reduced savings and growing debt for female workers and business owners.
But there are other long-term impacts. A year out of the workforce isn’t just a year of a lost salary and career growth; it’s a year of lost Social Security wages and a year of lost 401(k) contributions — from the female employee and the match from her employer.
Women need to understand some of these hidden ramifications and to explore their options.
That comes down to planning.
There is ample research that shows clients who have financial plans in place fare better in turbulent times than those who don’t. That’s because when you have a plan, you are more likely to stick with it.
A big part of planning, we believe, is helping a client unpack and understand their money script. Money scripts are unconscious beliefs and behaviors around money informed by our personal experiences and family circumstances. Understanding our money mind-set, and the history that contributes to our belief system, helps facilitate financial health and leads to better outcomes.
Negative money mind-sets can emerge in times of financial crisis, which is what we saw in the first few months of the pandemic when stock markets became turbulent. That’s because in the absence of any discipline, your money scripts will take over your financial behavior. That can be very damaging, especially in stressful times like what we’re going through today.
All too often we see people panic and sell at the bottom and then end up having to buy at the top — after the recovery. And, as we all know, that’s exactly the opposite of what is in the best interest for our clients.
We’re working really hard right now with all of our clients, not just women, to understand their money scripts so those negative money mind-sets don’t automatically kick in and drive them to make emotional investment decisions.
We’re also encouraging clients who are parents to be particularly mindful of the money scripts they are writing for their children during this volatile time. It’s important for them to understand how their actions form money scripts that their children could hold on to long after the COVID-19 pandemic has passed. Our reaction to financial stress and the narrative we share with our kids can leave a lasting impression.
To help women override those hard-wired money scripts, we have to offer them more than just reassurance. Most women want to take action to improve their situation and help their families.
It turns out that there are opportunities to do so.
One great example is Roth conversions. For many people, there’s never been a better time to do a Roth IRA conversion. For one, taxes are at an all-time low. In addition, many clients have had an “income disruption” this year in the form of a job loss, reduction in hours, or investment/business loss, helping offset the tax hit that they would take on a Roth IRA conversion.
Another opportunity might be charitable giving. The CARES Act passed in the spring made charitable giving much more attractive this year from a tax advantage standpoint. As such, we’ve seen a marked increase in people taking advantage of that provision.
These are just a couple of examples that women should consider in their financial planning to reduce their tax burden and improve their money script.
Ann Senne is head of advice & solutions, RBC Wealth Management–U.S. RBC Wealth Management, a division of RBC Capital Markets, LLC, Member NYSE/FINRA/SIPC.
