Most of us have a small business owner in our lives who has been impacted by COVID-19 — or you may even be an entrepreneur yourself, and the last few months have been incredibly challenging, if not devastating. And no one, it seems, has been impacted more than women of color, specifically Black and Latinx entrepreneurs. Black Americans have been disproportionately impacted by the pandemic in terms of both hospitalizations and deaths, and according to new data from social startup digitalundivided, 98% of Black and Latinx women entrepreneurs report that their business has been directly impacted by COVID-19. In fact, 82% report that they have experienced a loss of revenue, and just 12% had the ability to pay themselves a sustainable wage during this time.
On this week’s episode, we’re unpacking some of that data — and learning how we can help — with Lauren Maillian, CEO of digitalundivided, which uses data and advocacy to catalyze economic growth and create pathways to success for Black and Latinx women entrepreneurs. Lauren was the first Black woman to start an early-stage venture capital fund, as a founding partner and managing director at Gen-Y Capital Partners. She has also advised and invested in over 40 startups, which have generated over $75 million in revenue.
Listen in as Jean and Lauren talk about how she got her start — she actually began her entrepreneurial journey at age 19, when she co-founded a winery. (You read that right — she founded a winery before she could legally drink!)
Jean and Lauren dive head-first into how Black and Latinx entrepreneurs are really managing during this difficult time, and they discuss some of the key findings from digitalundivided’s recently released report on the state of Black women entrepreneurs during COVID-19. They also discuss Lauren’s new role (she was recently named CEO) and what’s next the organization and its support of entrepreneurs. Hint: even though they are a 501(c)(3) nonprofit organization, they operate like a startup, which enables them to stay nimble and offer help where it’s needed most.
Lauren also gets candid about the barriers women face in the world of fundraising, and talks about some of the more common challenges female founders are dealing with in the landscape today.
She also talks about how we can all create a safety net for our own financial security while we’re building a business, why “scrappiness” is at the heart of entrepreneurship, and how the protests that we’ve seen recently are impacting the black entrepreneurial community. Lauren details the distinction between “performative allyship” and real allyship, and discusses what Black owned businesses are really seeking during this time. She also shares how everyone listening can step up and create opportunity, share influence, empower, and uplift.
In Mailbag, Jean and Kathryn tackle two listener questions, including one from a listener who is debating getting life insurance but she’s not sure if she should go with whole life or term. We also hear from a listener who is a widow considering retirement at 63.5, but who is unsure about health insurance and remote work options. She also has questions on claiming her husband’s pension now vs. later. In Thrive, Jean dives into what to do if your summer internship was sidelined by Coronavirus. It’s not too late to snag something enjoyable (and meaningful, and lucrative) for the rest of the summer.
This podcast is proudly supported by Edelman Financial Engines. Let our modern wealth management advice raise your financial potential. Get the full story at EdelmanFinancialEngines.com. Sponsored by Edelman Financial Engines – Modern wealth planning. All advisory services offered through Financial Engines Advisors L.L.C. (FEA), a federally registered investment advisor. Results are not guaranteed. AM1969416
Lauren Maillian: (00:01)
How do you want to run your teams? How do you want to compensate people who are working with you? And what makes the best sense for your business? And most importantly, I think, is are you going to now run your business based upon what’s best for you and your team, or are you going to run your business based upon what you think is going to get you the best potential funding or support in the landscape that we’re in.
Jean Chatzky: (00:32)
HerMoney is brought to you by Fidelity Investments. Fidelity is committed to helping clients through any market conditions with the financial planning and advice when you need it most. Learn more at Fidelity.com.
Jean Chatzky: (00:50)
Hey everybody. I’m Jean Chatzky. Thanks so much for being here with me today. I think most of you who are out there listening right now have a small business owner, maybe many small business owners, in your life who have been impacted by Coronavirus. Or maybe you are that small business owner yourself and the last few months have been really, really tough for you. No one, it seems, has been impacted more than women of color, specifically Black and Latinx entrepreneurs. Black Americans have been disproportionately impacted by the pandemic in terms of both hospitalizations and deaths. And according to new data from the social start-up, digitalundivided, 98% of Black and Latinx women entrepreneurs report that their business has been directly impacted by COVID-19. 82% say they’ve experienced a loss of revenue and just 12% had the ability to pay themselves a sustainable wage during this time. That’s a lot of data. It’s a lot of really disturbing data. And today we are going to be unpacking that data. And we are going to be talking about how we can help with Lauren Maillian. She is CEO of digitalundivided, and this is an organization that uses not just data, but advocacy, to catalyze economic growth and to create pathways to success. Lauren was the first Black woman to start an early stage venture capital fund. She was a founding partner and managing director at Gen Y Capital Partners, and she has advised and invested in over 40 different start-ups, that’s a big number, that have together generated over 75 million in revenue. Very, very impressive, Lauren. Welcome. Thanks for being here.
Lauren Maillian: (02:51)
Thank you so much for having me. It is such an absolute pleasure. So thank you. And thank you for your dedication to the work and foremost, in it’s good times and it’s bad.
Jean Chatzky: (03:02)
Oh, I appreciate you saying that. I think our listeners know, I love the work. I find it really, really interesting and really rewarding. And especially during times like these, I welcome the chance to connect with people who are really trying to help women across the spectrum move forward. So I appreciate the work that you are doing as well. But before we get into digitalundivided, I want to talk a little bit about you because I understand that you were age 19 when you co-founded a winery. And let’s just be clear about this. You co-founded a winery. You launched this business before you were even allowed to legally drink. Can you tell us a little bit about that?
Lauren Maillian: (03:50)
Yeah, it’s so funny because that seems like forever ago for me in my career, but I know it’s such a fun fact. And so the truth of the matter is that there’s a lot that I like to joke about that I’ve always done early in life and certainly in career and in terms of seeing opportunities and wanting to seize it early on. And that seems to be the kind of through and through of my life as a change agent and certainly as an innovator. And sometimes we stick with those things. Sometimes we move on from them. But when I started the vineyard and winery, it really started first as a vineyard. And before that it started as a real estate investment, truth be told. And so then it was, well, what’s the agricultural use of this property and what’s the best way to operate the land and be a good steward of the land. And so it ended up being with this agricultural purpose of grape growing, which as you know, falls into its own kind of agricultural classification and the tax code that comes with its other wonderful benefits when you want to do good by the land and maintain it in certain ways to benefit, you know, the community, if you will. And so it really started as a grape growing operation. I guess the funny connection to finance is that it literally started with sitting down with the accountant and going through agricultural purpose and use for the property and what was, um, you know, popular and impactful in the region. And at the time, being Virginia, and Monticello, Virginia was being compared to the early days of Napa, like back in the seventies. And there was just so much promise there. And so when I started the vineyard, there were less than 50 wineries in the state of Virginia. And now you have more than 200, right? We didn’t even really have proper wine trails then. So when I say I was early, I was really early in that movement. But yes, you can have a vineyard and winery and you can have a bonded licensed facility. And I remember when the TTB, which is the government entity that actually grants you the ability to open and sell and gives you your permits and such, it’s the Tobacco Tax and Trade Bureau. And the gentleman comes up and he’s like, hi, young lady. And so that was the beginning of it. He goes, I’ve actually never granted a license to someone under age, but they can grant you the license. You just cannot consume the product. And so the timeline is actually that at 18, I purchased the property. At 19, while I was still in college pursuing my Bachelor of Science in International Trade and Marketing, I ended up planting the vineyard. For the first two years, we were just grape growers. So from the time I was 19 to 21, we were just grape growers. And then opened the facility, stopped selling grapes to the public and started making our own wine when I was 21. So we ended up opening the tasting room to the public when I was 22, right before I graduated college, actually. So there was certainly a journey there, but it takes a lot of time. And as anyone knows, wine is a work in progress for a year, good wine at least, before you get it in the bottle. So certainly, yeah the facility was licensed, bonded, and ready to go before I was of drinking age.
Jean Chatzky: (07:00)
Well, I gotta tell you, I was so not going to judge. I mean, I went to high school in Wheeling, West Virginia. The drinking age was still 18 when I graduated from high school. But I do vividly remember at 17 and maybe even 16 being served in local bars. And I probably looked 13 at the time. So, you know, nobody’s going to judge you if you were dabbling or sipping along the way.
Lauren Maillian: (07:29)
You know what? The truth of the matter is that my time in Charlottesville, and I always still lived in New York and would commute back and forth and spend substantial amounts of time there. But I really became a real true vineyard owner. I mean, I was out there pruning. I wanted to learn how to prune and I took as much joy in learning how the team, cause we had a winemaker and such would actually make the wines and go through that maturation process, as I was learning from my neighbors down in Virginia, how to make jam and jelly out of Chardonnay grapes and Cabernet Franc and Cabernet Sauvignon is some of the best jelly you can ever have.
Jean Chatzky: (08:04)
All right, I’m going to get down this rabbit hole if I don’t steer myself in the right direction, cause I’m fascinated with the whole industry. But I want to learn more about digitalundivided. Tell me about this organization and the focus of your work.
Lauren Maillian: (08:20)
Yeah. You know, the organization is really special. And we call ourselves a social start-up for a reason. And at the heart of that is that while we are yes, a nonprofit, we are a 501c3 public charity, we operate like a start-up in many ways, because we understand the need to innovate and to move fast and to be nimble and to adapt to the needs of the market and the ecosystem. And certainly the responsibility that we have as an organization to be responsive to the needs of the women, the Black and Latinx women who we serve. And so being able to work in kind of start-up fashion allows us to really, truly evolve with them as an organization, as quickly as we need to. And the work that we do, we’ve been doing for a long time. I’ve been involved with digitalundivided since the very beginning, before we even were a charity proper. So we started as just a conference in 2011. And I spoke at our first conference, judged our very first pitch competition and served as a mentor to those start-ups that joined us at that very first Focus 100 conference. And to see us be able to grow in the way that we have now, and I’ve been a long-time supporter and board member, and more recently just stepping into this role as CEO, it’s been incredible to see how early the organization was in identifying the need for diversity in technology and innovation, and how we have been able to really move and adapt as an org, as those definitions have changed and as the interest from women has also changed. Because I remember when I became an investor and advisor in the space, you were only in tech if you were an engineer. And if you couldn’t write code, you couldn’t see yourself as a technologist in any way. You didn’t feel that you deserved that title. And now we see everything from apps to communities and eCommerce solutions, certainly fitting squarely into that definition. And so to have seen where the industry has gone, and how important our work is and how early we have been here, and we certainly have a different perspective as an organization on what works and what doesn’t work, and a lot of proof points to show for it as well.
Jean Chatzky: (10:33)
We’ve had so many entrepreneurs on this show, women in different industries talking to us about their funding journeys and how horrendous they’ve been. And I know if you’re a woman of color, if you’re a Black woman, if you’re a Latinx woman, the barriers are that much greater. Tell us what you see in the field.
Lauren Maillian: (10:55)
Yeah. I mean the barriers are a lot greater, right? The hurdles are often greater for women anyway. So why would it be any different in the fundraising arena? So on average, when you look at the double minority being Black and Latinx women, we’re seeing that they raise on average $43,000. That pales in comparison to the million plus that we see men going out to raise. And so the funding environment obviously becomes much more difficult. And what I see happening, and what we see as an organization, is that you don’t ever get enough runway. And so while it’s awesome, when we do see women even raise enough money, they’re often still not getting enough runway to go out and do the work required to meet the milestones that would be expected of an investor to be able to come back again for your next round. And so, that first round gets really celebrated and it’s an incredible moment in time, no matter how much you raise have that sort of validation for your work. But if you’re not able to use it to actually work and to get to work, and you’re still spending time getting people to buy into your vision and believe in you, then oftentimes that capital isn’t able to work as hard when the founder is spending their time still out there looking for more money instead of using the capital that they have raised to work solely on their business and be focused. So, that is also the plight of most women with multitasking, whether we’re looking at home or work. And it just magnifies that issue when we look at the stress and the burden that that puts on Black and Latinx women, founders, who are competing in spaces that have higher expectations, yet they’re expected to meet those expectations with lesser resources.
Jean Chatzky: (12:41)
Well, and they’re expected to meet those expectations. I’ve so long been frustrated with the huge differences in how male and female founders are judged. That men are judged on their potential and women are judged on what they’ve already done. That has to change, I think, in order for funding in general to change.
Lauren Maillian: (13:06)
Jean Chatzky: (13:08)
Tell me about the research that you just conducted on the state of Black women entrepreneurs during COVID.
Lauren Maillian: (13:18)
Yeah, so, you know, at digitalundivided, we really always want to analyze the data. And while we know a lot of this information from intuition and certainly from experience, we also know that it’s the data that people pay attention to. It’s the numbers that matter. It’s the numbers that cause people to really, truly pay attention. And when we saw the devastation that the pandemic was doing to our community, and when I say our community, I don’t just mean digitalundivided and the women that we serve there. I mean the community at large, whether they are a part DID or not. We knew the devastation that this pandemic and that COVID was placing on communities of color. And it was important to us as an organization that we took a deeper dive into the impacts of this moment in time and really peel back the layers on what it was doing, not just to our community at large, not just digitalundivided’s immediate community that we serve, but also what was it doing to women who were launching businesses, leading businesses, innovating in spaces, and who were not maybe prepared for this in some ways. I mean, very few, when we did that survey, very few women out of 1200 respondents, 1,157 to be exact, said that they could pay themselves a livable wage and sustain that. Only 12%. And while many of us were long time pushing to digital and increasing our utilization of digital services in general, people were not prepared to run their whole teams in that way. They were not prepared to even run their lives in this way, with many of these precautions that we all had to take. And so it was important to us as an organization that we, a) find a way to step up and serve them, which we did in two ways that I’ll talk about. But that b) in doing so, that we have the data to substantiate again, what our intuition told us that we needed to do as an organization. And our intuition told us that as an organization, we need to support these women. So we very quickly did just that in two different ways. One was with our big alumni fund. We established an emergency fund where we gave $1,000 grants to past program participants and alumni of our program through a very easy application process. And we wanted to make the process as simple as possible because we also knew that a lot of the funding that was being rolled out and the applications, maybe weren’t going to be, applicable to the women that we serve. They wouldn’t be eligible for a lot of those programs. And we anticipated exactly what happened, which was that it was gonna take a long time to even get through those processes, to be able to receive any funding at all. And so we immediately established the big alumni emergency fund and gave those $1,000 grants. And then we also established the Doonie Fund, which was established by Kathryn Finney, the founder of the organization who’s since now stepped down. But, we saw an immediate need to say, we need to make micro-investments into our community. And while maybe this is just a small amount, and we did a hundred dollars, we wanted to do something that we could get to women the next day. And so that’s exactly what we did with the Doonie Fund and establishing that. And then we saw an outpouring of support from our existing funders and other sources that said, you know what? This is amazing. This is an incredible way to make small, measurable, but immediate impact that is still going to really be important during this time, when everything truly counts. And so we, again, wanted to go out and gather data to substantiate us making those two decisions. And the data said exactly what we thought. Confirmed and confirmed honestly our worst fears, which is that, yet again, our communities are disproportionately impacted by catastrophe.
Jean Chatzky: (17:11)
Yeah. And, I you just mentioned Kathryn, who has been a friend of this show for a very, very long time. I would urge anybody who’s listening and would like more information, not just on what’s happening now, but on the organization in general, to go back and listen to the show that we did with Kathryn. It’s been about a year or so since that happened. I want to talk about other funding opportunities for people in the community. But before I do that, let me just remind everybody HerMoney is supported by Fidelity Investments. For more than 70 years, investors have relied on Fidelity to help plan for their financial futures. And as always, when the unexpected happens, Fidelity’s there to help you work through it with financial planning and advice for what you need today and tomorrow, helping to make it all clear. To see how Fidelity can help you and your family on the path forward, visit fidelity.com. We are talking with Lauren Maillian, CEO of digitalundivided. You mentioned that money was very slow, making it through the process in terms of funding sources that were available. There is still significant money sitting in the coffers of the Paycheck Protection Program. Do you think that people should be looking at that program once again, now that the rules have changed about how long you have to repay the funds and what those funds should be used for?
Lauren Maillian: (18:44)
You know, that’s really tricky, right? Because one of my personal things is not counting other people’s money, right? If you will. And so I think those decisions are so personal because what we also see is that the Care Act has rolled out other funding for self-employed individuals. We’ve also seen that some of these other funding opportunities through PPP or otherwise might negate someone’s eligibility for some of these other programs. And so I feel as though everyone really needs to take a look at how you’re operating your business. And what I think is really important to notice in this time is how many entrepreneurs felt as though the way they had been running their business, and as you know, in the start-up world, it’s all about being scrappy and lean and how far you can stretch the dollar, right? And I’ve actually heard from a lot of women that they felt penalized for being lean, right?
Jean Chatzky: (19:41)
Lauren Maillian: (19:41)
Because if you didn’t run payroll and you used independent contractors and you had part time help, and you maybe outsourced to other locations and geographies, or if you were working in other ways that were more collaborative and more flexible for your needs and really best for your business, that it wasn’t best for you right now, because you couldn’t apply for some of these services. So I think it’s also been a learning moment for a lot of small businesses and entrepreneurs on the pros and the cons. And how do you want to run your teams? How do you want to compensate people who are working with you and what makes the best sense for your business? And most importantly, I think is are you going to now run your business based upon what’s best for you and your team, or are you going to run your business based upon what you think is going to get you the best potential funding or support in the landscape that we’re in?
Jean Chatzky: (20:33)
I agree with everything that you just said and I don’t know how much you know about HerMoney, but we are the company that you just described. We are small. We are scrappy. We use contractors. We do a lot of things as inexpensively as possible because we want to plow our money back into the company to grow. I think the other risk that I’ve been hearing from founders is that when you plow everything back into your business, you are often not creating that safety net that’s needed for your own financial security.
Lauren Maillian: (21:09)
Yeah, absolutely. And look so many of the best entrepreneurs do just that. It’s no different than what I do as an entrepreneur too. It’s like, you have to be scrappy because you need that flexibility, right? You really do. You need that flexibility oftentimes to make and meet the bottom line that you want. But again, this is the time where people feel like that has always been a wonderful decision, and now you feel like you’re being penalized for it. So I think that with the PPP, it comes down to, is this an opportunity? I think the one good part of the PPP is that you can hire new employees to make up for that. So I think if anyone’s looking to maybe grow their teams, those are the ones that should be considering that as the right support available to them in this moment. But I personally don’t want entrepreneurs to be discouraged from the ways that they’ve been scrappy, because I think that that is the heart of entrepreneurship. That is the heart of learning quickly and pivoting and finding opportunities is in those moments of being scrappy.
Jean Chatzky: (22:12)
I agree. And I also think the government money has just been flowing and eventually it’s going to stop and to count on that is a long-term mistake. We are taping this show after a week of continuing protests. Protests for George Floyd and Brionna Taylor and others. And as a result, we are seeing Black businesses increasingly spotlighted. How is this impacting your community and their start-ups and their businesses?
Lauren Maillian: (22:44)
You know, I think this moment it is. It is shining a bright light. What is interesting is how that bright light, I’m trying to actually think of the analogy I’d like to give. I guess, the intensity of that bright light, right? And, it’s coming with varied intensity. And when I say that, I mean, not to say that we are seeing that spotlight. What we’re also seeing is a lot of Black businesses being very firm in their values and reading into a lot of undertones. And while a lot of companies are looking to now maybe collaborate or reach out to Black-owned businesses, Black-owned businesses are also looking for sincerity in their attempts to do so. And it’s been interesting for me as a Black woman certainly, to see brands reaching out. It’s interesting to watch it on every side of the equation. To see brands reaching out, to see companies wanting to collaborate, to see who they’re looking to reach and engage from the Black community in doing so, which has also caused somewhat of an uproar in what we’re calling performative allyship as well. And this is the time where a lot of Black people, I’m also seeing say, you know what, there’s no price right now. Just come to me with real empathy. Just come to me with real care and concern. And so I think it poses a great opportunity. And while a lot of people are thinking that shining that spotlight poses a monetary opportunity, I think a lot of Black owned businesses are looking for it to create an equality opportunity instead, that has nothing to do with immediate renumeration, if you will. And it’s more like, see us, appreciate us, value us for who we are, and let’s keep making money together in the future. But don’t just throw the money at me now and not address the root of the problem.
Jean Chatzky: (24:44)
So well put so well put. I do think though that we have listeners who will be thinking they want to get involved. They are hearing what you’re doing. They’re thinking I want to invest. I want to donate. Maybe I’m an entrepreneur and I want to build something and I need some help and I need some resources. So I know that’s two sides of the equation, but can you address both of them?
Lauren Maillian: (25:11)
Yeah. I mean, I think for those that need resources, it’s interesting because I’ve been thinking about this a lot at digitalundivided, right? What do we, in terms of the impacts for DID, we have seen an outpouring of support that’s been incredible. But it’s interesting because where we are seeing the outpouring of support are places that should have been supporting us all along, quite frankly, if I’m going to really be honest. And so I look at that as an opportunity to open conversation. To open conversation, to say, please do more than just give us money right now. Please engage in conversation with us as part of the solution. And please allow me, as our leader, to share with you the impact of our work and our case studies and our success stories, so that you can appreciate them individually to allow you to appreciate our work as an organization even more. And when I look at the other ways that people can step up and do something, it’s also in just helping to create opportunity by way of sharing influence, power and partnership with Black people. And those are the things that, while not monetary in their nature, they have great economic impact. You know, letters of recommendation and co-signing for someone’s ability. Putting in a good word. Hiring someone. Broadening the diversity of an applicant pool. Maybe even looking at other ways to do hiring. These are all other ways that can be very beneficial long term and certainly are sustainable. And so I think those are the solutions that I’d like to see people speaking about as well.
Jean Chatzky: (26:48)
How do we find you and the organization online and in person?
Lauren Maillian: (26:55)
Yeah, so DID is @digitalundivided on Instagram, @didundiv on Twitter and digitalundivided.com. So I would love, love, love to invite your listeners to come learn about us at digitalundivided.com. We have a really robust website that’s got a lot of information on it to share a lot of our work and a lot of the work that we’re doing right now. And I am @LaurenMaillian, that’s L A U R E N M A I L L I A N. So @LaurenMaillian on social media everywhere, and laurenmaillian.com.
Jean Chatzky: (27:28)
Lauren, thank you so much. This was a great conversation and I hope that we’ll be able to have you back again soon.
Lauren Maillian: (27:34)
Thank you. It’s been so much fun. And again, I just want to thank you for allowing me to come on your show during this time and just recognizing the role that you play as well as such a leader in this space. And in many ways, how you just shared your mic with me right now in this moment. And so thank you. Thank you for having me on and to your team at HerMoney and keep up the wonderful work. And I can’t wait to come back and share hopefully what our work has done to change the trajectory of Black and Latinx women’s lives in this space of innovation and inclusion. So thank you.
Jean Chatzky: (28:07)
Thank you, too. We’ll do it again soon.
Lauren Maillian: (28:09)
Jean Chatzky: (28:10)
And we’ll be right back with Kathryn and your mailbag.
Jean Chatzky: (28:22)
HerMoney’s. Kathryn Tuggle joins me with your mailbag. Hey Kathryn.
Kathryn Tuggle: (28:27)
Hey there, Jean. How’s quarantine?
Jean Chatzky: (28:30)
Oh my goodness. I can say I’m over it.
Kathryn Tuggle: (28:34)
Jean Chatzky: (28:34)
I am just over it and I don’t want to let my guard down, my social distancing guard, because that’s not a good thing. But my next-door neighbor Jodie called me yesterday, and said she was in a quandary. And Jodie, I don’t know if I’ve talked a lot about Jodie on this show, but Jodie’s been my next door neighbor for 15 years. She’s one of my closest friends. I am in and out of her closet. And she is in and out of my closet on a regular basis during regular times. But I haven’t been inside her home in three months. And she called me yesterday and she was freaking out because she is trying to repaint her home office. And she had three very similar shades of whitish-gray, whitish-beige on the wall and needed to make a decision so that she could move forward. And so I put on my mask and I went over and I tried to stay six feet away, but it felt weird. It felt really wrong. But I did it anyway. So it was okay.
Kathryn Tuggle: (29:36)
Yeah. I mean, I think it’s going to feel weird for the foreseeable future. Like just looking at New York and then plan that outdoor dining is going to open in phase two, but then indoor dining is not going to open until phase three. And then I was talking to a friend, like what, what happens if you have to use the bathroom? Are you allowed to go inside and use the bathroom at the restaurants? Because that’s not outdoors?
Jean Chatzky: (30:00)
Kathryn Tuggle: (30:01)
Everybody, there’s just so many questions. There’s no clear cut anything right now.
Jean Chatzky: (30:06)
We were driving back from the Jersey shore. We’ve been spending sort of week on, week off at the Jersey shore. And I was driving back and I really had to pee, like I was not doing well. I was driving. But I did not want to stop at a rest stop. I just held it. I got home. And Elliot was like, can you help me unload the car? And I was like, no. I can’t. Have you not been listening to me? I have to pee. So I ditched him and ran into the house. But you know, it’s those things that we’re just going to have to wrap our brains around again.
Kathryn Tuggle: (30:39)
Jean Chatzky: (30:40)
Let’s change the subject and answer a couple of questions.
Kathryn Tuggle: (30:43)
For sure. Our first question comes to us from Ann. She writes, hi Jean. Please help. I think I should purchase life insurance to help with my funeral expenses so that my daughters won’t have to worry about anything when the time comes. I’m 67, in good health and single, but I’m not sure whether whole life insurance or term would be better for me. I’ve been receiving offers from my credit union and AARP, the latter of which is term insurance that ends at age 80. Does that mean that the policy has no value after age 80 or just that no further payments are made? Insurance has always confused me even when I was younger and married. I appreciate any advice you can offer.
Jean Chatzky: (31:19)
So this is a good question. And I don’t think it’s a question that we have had before. And so I’m very, very happy to answer it for you. Let’s just define term insurance and whole life insurance first. Term insurance terminates. So at 80 you stop making payments and then the term insurance does go away. You don’t have that death benefit anymore, which could mean that 13 years of paying into a policy that you want to help with funeral expenses essentially just goes down the drain. Whole life insurance is permanent insurance. It’s insurance that you buy and you pay into every single year. It builds up a cash value that you can borrow against, that you can cash out if you no longer want the policy. And as long as you make your premiums, you will have that policy forever. Whole life insurance is a lot more expensive than term life insurance. And I actually ran some numbers for you. So I think maybe this will help you sort of figure it out. So the cost of a funeral is somewhere between $7,000 and $12,000 on average. Now, if you’ve got that amount of money, that amount of assets, that your kids will inherit anyway, I wouldn’t necessarily advise that you buy insurance just to cover funeral expenses. I think they can cover those expenses out of your estate. And this is not an expense that you have to take on for the long term. But I also understand that it’s something that people think about and they feel very, very strongly about wanting to do it. So if you do go down the insurance route, I priced out a $25,000 whole life policy for somebody your age. It’s going to cost about a hundred six dollars a month for a woman in good health. I priced out a term insurance policy for $25,000. That’s going to cost about $20 a month. And so I think you could go either way. If you took the cheaper policy, if you took the term policy and then just banked the difference, put the other 85ish dollars a month into a savings account over the next 13 years, and you let that grow, that would be enough to pay for a funeral after the term policy lapsed at age 80. If you take the whole life policy, then you continue to make the payments and it grows value in that way. My big question for you is, can you afford to do this? I mean, if making the hundred and six dollar a month payment really, really eats into your standard of living, if it makes things difficult for you in any way, I would take the term policy. I would try to stash the additional cash. And I would know that I am growing a supplemental nest egg that is for a funeral, but that you could get at if you needed it in case of any other emergency. That’s kind of how I play it. Kathryn, what do you think? Do you have any other thoughts on this?
Kathryn Tuggle: (34:59)
I think that sounds great. Honestly, I’ve never really looked into life insurance, but I understand why people are so confused. It’s crazy.
Jean Chatzky: (35:08)
Well, and term and whole are just two of the very large number of different types of policies. And so I get it. I believe that life insurance is for the living and that again, as I said, if you’ve got enough in assets, so that your daughters will not find it difficult to pay for your funeral, then I don’t think it’s something that you have to worry about doing at all. But if it is something that you feel strongly about, I probably would go the term route.
Kathryn Tuggle: (35:41)
Right. Yeah. I think you’re totally right that some people don’t have this. They just know that their estate will pay for it.
Jean Chatzky: (35:47)
Yeah. All right. What else we got?
Kathryn Tuggle: (35:50)
Our last question comes to us from Karen in South Dakota. She writes, dear Jean and Kathryn. Thank you so much for all the valuable information you provide each week. Here’s some background to my question. My husband died unexpectedly in 2015. We both worked full time since our twenties for the state government. And we each had a pension and a supplemental plan. They are fully funded to the maximum. I make about $106,000 per year, and I’m now 62 years old. I intend to retire at 63.5 and then use Cobra for health insurance until I’m 65. If my employer allows me to work remotely, I will work past 63.5. When I retire, I plan to move closer to my children, grandchildren, and siblings. And I don’t need to claim social security until I’m 70. My only debt is a mortgage of $175,000. I expect my house to sell for about 400,000 and I will downsize when I move. I haven’t paid off the mortgage as it’s financed at 2.35% and my accountant recommends not paying it off. I’ve maxed out the amount I can put into my HSA and IRAs. The life insurance money is in the stock market being professionally managed. I keep $140,000 in a money market account earning 2.5% as my emergency fund. And I have a checking account. I can easily live on my salary alone. Also as a surviving spouse, I can claim my husband’s pension. It’s defined lifetime benefit. If I claim it now it’s worth 3,450 a month. As 63.5, it will be worth 3,650 a month. And at 65 it will be worth 3,950 a month. Claiming it now would move me into the next tax bracket of 24%. So, when is it most advantageous to claim my husband’s pension? I can leave it and let it grow as I have been doing, or I could claim it now and invest the money somewhere else to do better for me. Is there a better place to invest that money than in the stock market with my other money? Thank you so much for any guidance.
Jean Chatzky: (37:38)
Wow. First of all, Karen, let me just say thanks for the letter. I’m really, really sorry about your husband and I hope that you are doing okay. It’s sounds like you are doing more than okay financially. And I think you probably know that because it sounds also like you are truly on top of this stuff. But I just want you to know that your picture looks really, really good. As far as the pension, when we talk about waiting to claim social security until age 70 it’s because in the years that you wait between age 62 and age 70, the social security benefit grows annually by about 8% a year. That is a really, really good return. It’s a guaranteed return that is really tough to beat. Waiting to take your husband’s pension, you’re not getting a return that sizable. I just did some quick math and it looks like if you wait until 63 and a half, you’re getting an annual return of a little under 4% a year. If you wait until 65, you’re getting a return of about 5% a year. On the flip side, if you took the money now, in a year and a half, you’d have about $65,000 in benefits that you could invest any way that you want. If you took the money now at age 65, in three years, you’d have about $125,000. And my question for you is, what’s all this money for, which may not be the question that you’re asking yourself. It sounds like you’ve plenty to live on. It sounds to me like you have the ability to buy a place that you want to live, that you have plenty of money in retirement accounts, that you have another pension of your own that you will be drawing on in addition to social security. I’m wondering if there’s something else on your list. I’m wondering if there is living that you want to do. And if this money would provide you the ability to do something that you’ve been waiting on. Sometimes I think we forget to stop and just ask ourselves, especially in situations like yours, where you know how short life is because you lost your husband unexpectedly, If there are boxes that we want to check off. If there are things that we actually want to do. And maybe you want to do them with those kids or grandkids or siblings. From a financial perspective, I think you could truly go either way. But from a life perspective, I want you to think about this and then I want you to write back to us and let us know what you decide. And I hope that that’s helpful.
Kathryn Tuggle: (40:44)
I love that you asked her that question, Jean, because she is in such a great position and she has so many more years of life left to live.
Jean Chatzky: (40:51)
Yeah, I would hate to think that something would happen to her and she would have a bucket list or a wishlist or something that she didn’t check off because she was worried about not having enough money. Cause it sounds like she is going to have plenty, and plenty of people to help take care of her should she need care down the road.
Kathryn Tuggle: (41:11)
Jean Chatzky: (41:13)
Thank you, Kathryn.
Kathryn Tuggle: (41:14)
Jean Chatzky: (41:15)
In today’s Thrive, what do you do if your summer internship was sidelined by Coronavirus? Unfortunately, the job market has changed drastically over the past few months. Since the onset of COVID-19 millions and millions and millions of Americans have filed for unemployment and, as companies cut their workforces, internships have been canceled left and right. If you’re in this situation, take a little time to reflect. Look back at times of ecstatic engagement. That’s when you were so engaged in an activity that you lost track of time and then look forward. How can you find that again in your next endeavor? In other words, how can you use this time to learn more about yourself and what you want, so that you can approach the rest of college and your career with even more purpose? Keep in mind that the rise of remote work may mean more access to more opportunities that you might not have been considered for in the past due to location. You can still search for a virtual internship, even a short term one, on platforms like LinkedIn, internships.com Intern from Home, Way Up and Handshake. There are also volunteer-specific opportunities on sites like Volunteer Match and Net Impact. Since the job market’s changing so quickly during this time, it’s smart to direct your energy first towards jobs listed in the last week, then the past two weeks, then the past month. You get the idea. If a listing is over a month old, it’s likely safe to assume it’s either no longer viable or already has a flood of applications. And if you don’t see anything that seems right, it’s okay to do some cold calling to organizations, executives, or influencers that you admire. Reach out on social media or over email. Send them a professional note demonstrating that you’ve done your research on what they do. And inquire about a virtual internship or suggest that you might work for them on a project basis. In other words, there’s still time to create your own internship this summer. Just make sure that whenever you reach out, you offer clearly laid suggestions and an action plan for how you could help the person or organization and make their lives easier. Thanks so much for joining me today on HerMoney. Thanks to Lauren Maillian for the great conversation, for insight into the world of Black and Latinx entrepreneurs and how they’re being impacted during this time. If you like what you hear, I hope you’ll subscribe to our show at Apple Podcasts. Leave us a review because we love hearing what you think. We also want to thank our sponsor Fidelity. As always, we’d like to thank all of you for joining us, for reaching out to us on Facebook and our mail bag and for inspiring us to do what we do every day. Thanks for joining me. And we’ll talk soon.