Don’t Be an Ordinary Woman

Why the standard personal finance advice is the wrong advice for women

I often see articles that lament the state of women’s personal finance in today’s world. And it’s true. Many women have a lot of work to do when it comes to catching up with men on investment and money matters. That’s why I started Rich Women after all!

The goal for my work with women and financial education has always been to help them become free—both in their thinking and in their finances. And when I read the advice most women (and men for that matter) are given about money and investing, I know that we’re pursuing a noble mission.

Take a recent advice column I came across where a reader asks:

For the past three years, my 29-year-old daughter has been working for a good company that offers a 401(k), but she still hasn’t started to contribute. She says she can’t afford it. How can I convince her to get going?

The advice is predictably the same. Rather than challenge the woman’s assumptions that a 401(k) is the best choice, the advice columnist goes on to dig into the different types of programs there are (traditional vs. Roth), the matching programs the daughter’s company may have, how much money is being left on the table, and the importance of researching funds to make sure there is a diversified portfolio.

A different viewpoint

When Robert and I started the Rich Dad Company many years ago, we did so specifically to provide an alternative to this standard, so-called expert advice.

This advice is just a rehash of some of the standard advice that we’ve called scams at Rich Dad:Work hard, save money, and invest diversely in the long term.

To me, these are not ways to become financially free. I suppose they’re better than doing nothing at all, but the advice to simply sock money away into a 401(k) does not help women to become better with money or investing.

Why? Because anyone can do that. It’s as simple as filling out a few forms and reading a quarterly statement—assuming you know what they mean when you do!

Follow the money

First off, when you read advice like this columnist’s, it’s always good to follow the money. If you go to the byline, lo and behold, you read, “This column is no substitute for an individualized recommendation, tax, legal or personalized investment advice. COPYRIGHT 2014 CHARLES SCHWAB & CO., INC. MEMBER SIPC. (0515-3400).”

That’s right, Charles Schwab, a leading investment firm that deals with and makes a lot of money in paper asset vehicles such as the 401(k) owns the rights to this “advice” column. And the author, she wrote a book for Charles Schwab.

The point is not to vilify the author or Charles Schwab, but simply to show that not everything you read is objective. Of course Charles Schwab would want more women to invest in mutual funds. That’s how they make their money!

Thinking differently about money

At Rich Dad, we teach there are four asset classes: real estate, commodities, business, and paper assets.

The problem with the standard 401(k) advice is that while it’s billed as being diversified, it’s really not. You may own lots of different types of paper assets, but at the end of the day, all you own is paper assets!

And if the economy suffers like it did during the last great recession, and all paper assets sink, so does your so-called diversified portfolio. I don’t know about you, but I’d rather not bet on the timing of the markets for my financial future.

A truly diversified investment portfolio is spread among a number of truly different asset classes, not just paper ones.

So, if I were going to give this mother advice to tell her daughter, it would be this: Tell her there are so many exciting ways to invest her money and so many better ways to make her money work for her than just the standard advice to save.

Encourage her to explore the things that interest her the most, to challenge herself to grow and her mindset to change.

Show her that the financial world is so much wider, more fascinating, and more fun than she ever imagined.

And encourage her to always, always be learning more and more about money and investing.

If she does that she’ll be just fine. Come to think of it, if you do that—you’ll be just fine too.

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Original publish date: May 21, 2015

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