By Mitchell E. Kauffman, MBA

If longevity is a race, then women are the winners: Women outlive men (Females 80.2 years and males 74.5 years); wives live 8-10 years longer than their husbands if they’re married at the same age; and over 75% of women are eventually widowed.

As a result, women must take hold of their financial futures.

The unexpected death of a husband or a recent divorce may mean that a woman is suddenly making all financial decisions. In some cases, they may have been doing this all along. But if not, the unanticipated responsibility can be overwhelming.

In addition, the consequences of poor planning can be devastating. Several studies conclude that after the death of a spouse, up to 80% of life insurance proceeds can be depleted—a lifetime building a nest egg could disappear within a matter of months.

Married or single, it can be beneficial for our clients to reflect on the top 10 financial challenges that women face with suggestions and solutions:

1. Putting the needs of others ahead of your own. A woman will often fund her child’s education before her own retirement, or she’ll loan money to relatives that may never be repaid. Solution: Pay herself first. I tell clients if they have ever flown, they have heard the flight attendant remind them to put the life vest and oxygen mask on themselves first, even before they help family members.
2. Spending money to compensate for emotional needs. Suggestion: Encourage clients to observe their behavior. Then create ways to get through difficult times that don’t require spending money.
3. Deciding whether to keep the mortgage or pay it off. Many advisors believe that for clients over 50 and plan to stay in their home then it makes sense to pay off the mortgage. It is important to be aware that women are often less comfortable with loans than men. As a result, they may decide to pay off the loan even if it’s not in their best interest. Suggestion: How we typically develop a plan depends on the following five factors: Tax bracket, the size of the client’s portfolio relative to the size of the loan, projected cash flow, the liquidity of assets, and what decision will be best for the client’s emotional situation.
4. Living in a home that is too large or expensive. Many women have a strong nesting instinct. As a result, women often place great importance on remaining in their homes. But sometimes there are better options. Suggestion: Similar to point 3, clients are advised to evaluate the five factors, and decide what is best for them.
5. Having an outdated or non-existent estate plan. Considering mortality is never easy. Suggestion: I tell my clients that one of the best gifts that they can provide loved ones is to have their finances in order after their death. Preparation means your estate can be settled more quickly with less cost and hopefully reduce some of the emotional burden on your heirs.  It can also help relatives avoid having to seek out court appointed guardianship, which can add more cost and even emotional trauma. Finally, it is always important to keep family members informed of financial decisions, the location of assets and estate planning documents, and make sure they have determined who will control asset matters should they become incapacitated.
6. Having an investment plan that doesn’t focus on the client’s individual needs. Does the client’s investment program reflect their income, growth, tax bracket, and estate? Suggestion: For clients fortunate enough to have more income than they need, consider income deferral and gifting programs. If their savings falls below the income they require, it may be time to review their expenditures and investment allocations.
7. Being too aggressive or too conservative with investments. Solution: Determine whether the client’s investment plan addresses their income needs and risk tolerance.  Seek objective input.
8. Holding investments too long. A common problem I see when meeting with clients is an attachment to their investments and an aversion to change. Solution: Part of the financial planning process involves creating investment benchmarks. It is a good idea to review and evaluate these with an independent advisor on a regular basis and make adjustments as necessary.
9. Seeking financial advice from someone other than an advisor who is certified in financial planning. Solution: Review an advisor’s experience and background, and request references.
10. Withdrawing too much or too little from a retirement plan. Suggestion: Deciding whether to take out more or less requires an objective outlook. Base the withdrawal amount on the client’s tax bracket and cash flow needs both this year and in the future.

What if there was mandatory money instruction for every child in America from kindergarten on up and every adult was required to take an annual test confirming those concepts well into their senior years?

It’s a nice fantasy. But in reality, the first money lessons a child gets come from their parents, and experts agree that the way parents teach and reinforce those concepts will have a major impact on their kids avoiding major financial problems later in life.

So, a question for parents: How equipped are you to teach your kids about money?

If you don’t feel confident about creating a money curriculum for your child, don’t worry, there’s help. Start by planning your own financial future with a qualified financial planner. You can take a close look at where you need to be with your finances and gather ideas to teach your kids about money as well.

However you personalize the lesson, every parent needs to involve these five basic concepts in a child’s money education:

1. Work: It’s true. The first great lesson isn’t so much about money as what it takes to earn money. As early as kindergarten or first grade, your kid is going to have to start paying for things. Children need to understand as early as possible that a good day’s work should deliver a good day’s pay, so it’s a good idea to come up with age-appropriate chores in exchange for an allowance. The best place to start is with simple jobs like setting the table and making beds. For older kids, yard work, laundry and housecleaning are good to add to the list.

How big should that allowance be? Try to match the allowance closely to the expenses you want your child to cover and leave a little wiggle room for treats. That way, the child begins to understand choice while learning that spending requires limits. Also offer options that allow children the opportunity to earn additional money for extras – toys or privileges, for instance – then stress why working for treats is important. When kids are younger, you should keep a frequent watch over how they’re handling their cash – checking in every day or so – and then allow them more leverage as they demonstrate wise decisions.

2. Saving: Once you teach your kids about spending, help them identify larger goals they have to save for. Buy a piggy bank – young children relate very well to this tried-and-true symbol of saving. It gives them someplace to put money out of sight so they don’t spend it, and you should impress upon them that they are free to tap into it only to accomplish a goal that the both of you initially discuss. Again, as they make smarter decisions, let them have more responsibility. And this lesson shouldn’t just be about buying stuff – kids need to learn how money can be used for setting and accomplishing goals.

If it makes sense for you, you can also add incentives to save. One idea: Tell your son or daughter that you’ll give them $1 for every $5 or $10 they put in the bank. It will definitely make them think twice about an impulse purchase.

3. Budgeting: Budgeting is one of the most universally misunderstood money concepts for children and adults. That’s why it’s so important to make sure a child understands why it’s so important to write down money priorities and keep track of whether those priorities are being met. When a child gets a little older, it might be a good idea to help them establish a budget for everyday expenses with an important side goal, such as accumulating spending money for a much-anticipated family vacation. Parents might show kids a similar exercise for how they’re setting aside money for the trip. Unsure how to set up a budget? PBS Kids offers an example.

For younger kids, it might make sense to turn the budgeting process into a game. Parents might take a stack of fake money, give it to the child and ask what they would spend it on. The child would write down each purpose – toys, school lunches and special things they need to save for – and get them to write down how they’d allocate the cash. This can turn into a real exercise later.

4. Delayed gratification: If budgeting and savings are going to work, kids need to know they can’t spend their money whenever they feel like it. Parents need to lead by example here. If kids always see you paying with plastic and bringing home carfuls of shopping bags each week from the mall, they might get a sense that money is limitless. On the other hand, if they see you making lists, tearing out coupons and talking about saving for particular goals over the long term – they might start to mimic that behavior.

5. Helping others: It’s important for children to know that there is always someone less fortunate than themselves and it’s important to help, even in a small way. Increasingly, kids are involved in charitable and community activities as part of their educational process – such work even figures into college applications. Teaching your children to set aside a little for those who have less might be a good first lesson in what should be a lifetime of sharing with others. Also, don’t forget that charity isn’t always about money. Kids should also learn the importance of giving their time and labor to important causes and people in need. And if they think of unique and effective ideas to help, by all means, praise and encourage that activity.

September 2010 — This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by                    , a local member of FPA.