Anya Kamenetz Generation Debt

It's hard to believe that just two generations ago, most women -- like both my grandmothers -- were unpaid homemakers or had low-paying "pink collar" jobs.

Times have changed, but there are still good reasons for young women to pay special attention to their earning, spending, saving, and investing to ensure optimal financial health.

Earnings Are Up, But Not Equal

One factor that's really changed for this generation is that women in their 20s are actually better educated than men their age. In 2004-2005, women earned the majority of bachelor's and master's degrees, and 57 percent of college students were women.

Still, women are earning about 77 percent of what men earn on average. That's for full-time, year-round jobs, not taking into account the reality that most women will work part time or step out of the workforce altogether at some point because of caretaking obligations.

There's lots of evidence that mothers, especially, earn less and face more obstacles advancing in their careers, no matter what their childcare solution is. Currently, 30-year-old American women without children earn 90 percent of men's wages, while mothers of the same age and education are making only 70 percent of what men do. The same gap doesn't exist between childless men and fathers.

Women in their 20s, though, are doing better: In 2005, they earned 89 percent of men's salaries. In New York City, Dallas, Boston, Chicago, and a select few other metropolitan areas, 20-something women actually earned more than men in 2005. This is mostly because these cities had high concentrations of highly educated women. But bright young women actually got paid more than men for some of the same high-paying professions, including doctor, lawyer, and architect.

Shoes or Savings?

Speaking of, um, sex and the city, a prevalent stereotype about young women is that they're obsessed with shopping and ignore saving. One PR firm dubbed this the "Carrie Bradshaw effect," after finding in one survey that most single women in their 20s and 30s expected to acquire 30 pairs of shoes before they'd saved $35,000 for retirement.

Let's go to the numbers behind the stereotypes. According to the Federal Reserve Board's most recent Survey of Consumer Finances, the median annual credit card debt for single women was $100 less than for single men -- $1,900 compared with $2,000. And as Time magazine pointed out, while single women splurge on clothing and personal-care products, single men spend far more on themselves in total for items like cars, audio equipment, and entertainment.

On the other hand, in a 2005 survey of 700 college students nationwide, researchers found that the women had more credit cards and higher debt, paid late more often, and were more likely to not pay their balances in full. And other surveys have found that young women are more prone to live from paycheck to paycheck than young men -- perhaps due to the lingering pay gap.

Start Saving Now

Truth is, it's a good idea to control spending whether your guilty pleasure is PS2 games or Kate Spade bags. I like the approach taken by Manisha Thakor and Sharon Kedar, two Chartered Financial Analysts and MBAs who wrote the recent guide "On My Own Two Feet: A Modern Girl's Guide to Personal Finance." Their advice isn't condescending or excessively gendered, yet it's approachable, easy to understand, and fits women's needs.

The authors say young women have solid statistical reasons to be concerned. "Financial literacy is an equally large problem for both genders," says Thakor, "but the result is felt most strongly by women, both because of the wage gap and because we're the ones left statistically holding the bag at the end of the day." That is, women both live longer than men and tend to choose partners who are older.

"WISER [the Women's Institute for a Secure Retirement] has this stat that just makes me want to hurl!" Thakor continues. "Eighty percent of men die married, 80 percent of women die single." Moreover, because of time taken off for care-giving, women retirees receive only half the average pension benefits that men receive, and two-thirds of women rely on Social Security as their sole support in retirement.

Thakor and Kedar have a simple remedy: Start saving now. Because of the magic of compound interest, a dollar you put away at 21 will grow to be worth more at retirement than $2 you put away at 41. They recommend saving 15 percent of your gross income: 10 percent on retirement and the rest for unexpected or big-ticket expenses. They give great advice on prioritizing your planning between saving and paying off debt, but they're very clear that low incomes are no excuse for not saving now. "We all know people who save on $30K and people who don't save on $300K," says Kedar. "That's why you need guidelines and a roadmap for your money."

A Man Is Not a Plan

From my experience and that of people I've interviewed, there's some truth to the notion that young women don't necessarily take control of their savings or investments as early as we should. In one national survey, over half of women between age 24 and 35 had less than $500 in savings.

From the Disney Princess years onward, women are still conditioned to link economic security and future planning with relationships. At times, even the most independent woman may dream of marrying a man who earns enough to solve all her financial problems, without taking into account the chance of one day outliving her spouse or of divorce. Or we may postpone important money decisions because long-term love hasn't yet entered the picture.

Kedar and Thakor are adamant about the importance of talking about money clearly and openly in relationships: "Don't assume that Prince Charming knows what he's talking about" when it comes to money, Thakor says.

Take Charge of Your Future

The good news is that women have some real financial wisdom to bring to the table, whether in a partnership or when planning on their own.

In one study over six years, single women's portfolios gained 2.3 percent more than those maintained by single men. Financial planners and advisors I've talked to say that women in general do more research, seek out good advice, are more cautious, and make trades less often. This helps them get better returns while saving on transaction costs and capital gains tax.

Readers of "On My Own Two Feet" are starting clubs across the country where they meet with girlfriends once a month, maybe over a glass of wine, to work through the steps in the book and share their tips on saving and planning. "It's time that we as women start encouraging each other to take charge of our finances," says Kedar.

"If you own your finances, you own your life," she continues. "You can lead the life you want, move jobs for the right reasons, stay with a partner for the right reasons." That's the kind of women's empowerment that will last much longer than a trendy outfit or a pink drink.

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Thanks to all who responded to my last column, "Staying Frugal in the Age of the iPhone." I just had to share this story with you: The day it was published, I was planning to wear the Ann Taylor thrift-store button-down I mentioned in the article on a panel at a conference. When I applied a too-hot iron to it in my hotel room, the fabric split up the front. So, after four years of good service, it's time to get a new blouse -- hopefully on sale!