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Women and Money: Bridge The Gap

It’s no secret that women fight more of an uphill battle than male peers in their efforts to reach personal financial goals.

Articles by sherrillstgermain

By Sherrill St. Germain
Financial Columnist, Betterment  |  Published: May 17, 2019

The money challenges women face compared to men still outweigh the opportunities, but that’s changing.

Despite the uneven playing field, women can achieve financial security – for the benefit of themselves, their families, and future generations.

$430,480. That’s what it costs to be a woman, according to the National Women’s Law Center. It’s the wage gap that results from a lifetime of being paid less than men.

It’s no secret that women fight more of an uphill battle than male peers in their efforts to reach personal financial goals. That nearly half-million dollar wage disparity may be the best known financial hurdle that a number of women face today, but it’s not the only one.

Let’s take a look at what other financial hurdles women face, issues they should reconsider, the opportunities they should take advantage of, and what it will take to bridge the gap.

The Hurdles You Should Pay Attention To

Earning Their Money

The wage gap women face starts with lower pay for comparable work. More time out of the workforce (15% of working years vs. 2% for men), primarily for family caregiving, compounds the problem. On top of that, when women are fired from their role, they tend to take an average 24% pay cut at their next job, as compared to the 1.3% increase men see.

Spending Their Money: The “Pink Tax”

Not only do women often earn less for comparable work, they also tend to pay more for comparable goods and services. This so-called “pink tax” is levied on everything from hair care to healthcare. In some cases, it extends to financial products such as mortgages, business loans, and annuities.

The Issues You Should Reconsider

How confident are you?

A mere 9% of women think they are better investors than men, per a recent study. Traditional gender roles had them showing up late to the party on this, so a case of newbie nerves is to be expected. The problem is that this confidence gap results in reduced risk tolerance.

Women wait longer to invest and, when they finally do, they tend to stash larger portions of their money in safer, but low earning, accounts. Compounded over time, this more conservative approach can exact a big toll on women’s net worth.

Are you considering your life expectancy as much as you should?

According to 2017 Center for Disease Control data, the life expectancy for American women is 81.6 years. This means, on average, women get 5 more years than men to enjoy the good life, whether that’s globe hopping, playing golf, or spending time with the grandkids.

But it’s also 5 extra years of living expenses to fund. And some of those additional years can be extra costly as healthcare expenses soar in later life.

Thanks to the hurdles faced en route to retirement, women are forced to cover these higher costs with a comparatively smaller pool of resources. That can include:

  • Lower Social Security benefits
  • Reduced pension payouts
  • Smaller nest eggs

The Opportunities You Should Take Advantage Of

Behavioral Finance Is On Your Side

On the plus side, some gender differences work in women’s favor as do demographic trends. For starters, studies show that women are better savers than men.  In particular, they have higher 401(k) participation rates and those that do participate, contribute a higher percentage of pay.

Furthermore, behavioral finance research has found that women are also better long-term investors. That’s primarily because, once invested, they are more inclined to “stay the course” regardless of market conditions.

Not only does this reduce unprofitable panic selling, it minimizes fees and capital gains taxes. Additional data suggests that this may ultimately result in generally higher rates of return.

Shifting Gender Roles

Shifting gender roles are affording women more opportunities to leverage those inherent advantages. With 2/3 now acting as primary or co-breadwinner, it’s not surprising that women, and the men in their lives, want to make the most of that hard-earned money.

Accordingly, many are eager to learn about financial planning—92 percent according to one study.

This hunger for information has spawned a treasure trove of resources. That includes a burgeoning cadre of role models of all stripes, from finally-debt-free millennial bloggers to women CFOs. Watching these prominent women in finance talk openly and confidently about money is inspiring others to overcome cultural barriers and do the same.

The cost of ignoring women is finally dawning on the historically male-centric financial services industry. The push to better serve women remains in its infancy, but an estimated $800 billion missed market opportunity is driving it forward.

Bridging the Gap

When it comes to gender and money, things are moving toward parity with increasing momentum, and there’s a few steps women can take to accelerate the process even more. Here’s how.

Just start.

Fear of making mistakes often prompts women to delay important financial decisions until fully versed in the matter at hand. While it’s smart to look before you leap, losing out on the magic of compound interest can be just as costly as imperfect execution.

Get smart.

Financial education is one of the few investments that comes with little to no risk. These days, it’s easily accessible via a startling assortment of seminars, blogs, podcasts, videos, forums, and more—many free or low cost.

Take part.

Splitting up your money management “To Do” list with a spouse or financial planner makes good sense,  but women should stay intimately involved to ensure their interests are represented.

The journey to women’s financial parity is far from over, but the progress has been impressive. And with the collective impact of more and more women taking control of their money, maybe someday “the gender gap” can be relegated to the dustbin of history.

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