4 Ways Women Can Counter The Financial Effects Of COVID-19
The COVID-19 pandemic and its economic fallout are having a regressive effect on gender equality. Here are four solutions that can help women empower themselves financially.
Whether you experienced the virus yourself, cared for sick loved ones, lost your job, had work fundamentally change, or assumed new roles in your household as kids stayed home from school and daycare, it goes without saying that no one is going to walk away from the COVID-19 pandemic untouched.
That being said, data regarding the immediate and projected long-term effects of the pandemic consistently show that the impact on women—particularly women of color—are far greater than the impact on our male counterparts.
How Women Are More Vulnerable To COVID-19 Economic Effects
In September, four times as many women dropped out of the labor force compared to men. During the spring and summer of 2020, on average, 10% of working mothers reported not working each week because they were caring for a child who was not in school or childcare.
And to make matters worse, in addition to all of this, women also experience a greater negative financial impact.
To understand the significance of what is happening, it’s crucial to address the wealth gap prior to the start of the pandemic.
According to the National Partnership for Women & Families:
- “White, non-Hispanic women are typically paid just 79 cents for every dollar paid to white, non-Hispanic men.”
- “Black women are typically paid just 63 cents for every dollar paid to white, non-Hispanic men.”
- “Native American women are typically paid just 60 cents for every dollar paid to white, non-Hispanic men.”
- “Latinas are typically paid just 55 cents for every dollar paid to white, non-Hispanic men.”
As shown above, the wealth gap is significantly wider for women of color, as they face not only a gender wealth gap, but a racial wealth gap as well. This means that well before the world turned upside down, women were already facing major headwinds financially, and now things seem to be getting harder, not easier.
While this is a pretty harsh reality, the good news is that even in tough times, there are things all women can do to help themselves and their families succeed financially.
1. Know your expenses.
First things first: Know what you spend money on each month. It is easy to feel overwhelmed and bury your head in the sand when bills start piling up, but knowing where your money goes can help you stay in control of your finances.
For example, many people forget about small recurring bills for subscriptions or services, which could add up when money is tight. Housing costs are typically the largest expense, but this is not something that’s easily reducible if you are experiencing job loss or lower wages.
Knowing the money areas that are more flexible can help you come up with an effective cost cutting strategy that can be implemented at any time.
Research Relief Programs
As part of knowing what you spend, you should also know where you can cut costs on larger bills.
Due to COVID-19, many private companies are providing some relief to their customers. Educate yourself on the programs available, be it a reduced rate on your utility bill, or waiving late credit card fees.
In addition, various social service agencies, states, and local governments are still offering additional rent assistance, and President Biden extended the nationwide moratorium on foreclosures and evictions until at least March 31.
Think of it like a fire drill: If you know what to do beforehand, you know what to do in the face of an emergency.
2. Manage debt.
The Equal Credit Opportunity Act of 1974 banned lenders from discriminating against consumers based on sex. It is illegal for lenders to charge women higher interest rates based on sex or race. Unfortunately, bias still shows up in the lending process.
For example, lenders typically use income to inform loan terms, and since women are statistically paid less, and take on more unpaid work (particularly true during the pandemic), it is no surprise that women face less favorable terms like higher interest rates on credit cards and personal loans.
While the system is certainly flawed, managing debt effectively is something everyone can do. If you’re able, the most important thing to do is make sure you are making minimum payments on time. This will help you avoid late fees and negative impacts to your credit score, as missed or late payments feed into payment history which is a large part of your credit score.
Women should also be careful about how much they put on credit cards, as many credit card companies will approve customers for larger lines of credit than they can really afford to pay back in a reasonable time frame.
Of course, in an emergency sometimes credit cards or loans are your only option to bridge the gap before you are back on your feet, so make sure you use them judiciously.
3. Build an emergency fund.
Unfortunately, there are few, if any, programs in the U.S. that act as social or medical “emergency funds” for Americans facing financial hardships unrelated to the pandemic or natural disasters, so it is largely up to individuals to protect themselves financially.
If you are fortunate enough to still be employed, you should consider building a three to six month emergency fund. It should cover three to six months of your living expenses to protect you in case of sudden job loss, unexpected medical bills, or other unforeseen events that could cause you to go into debt.
I recommend keeping your emergency fund in a low risk account such as a high yield savings account, or low risk investment account.
If you do choose to keep your funds in a low risk investment account, at Betterment we currently recommend keeping your portfolio in a 30% stock/70% bond allocation. This is to help keep up with inflation and maintain your money’s purchasing power over time.
Use state and federal funds for emergencies.
If unfortunately you’ve lost your job during the pandemic or are working less hours, then applying for your state and local unemployment benefits is the best course of action.
In addition, with the new COVID-19 relief bill, expanded unemployment benefits from the federal government would be extended through September 6th, 2021 at $300 per week. This in addition to the one time stimulus checks, with single taxpayers getting $1,400 checks, while married couples who file jointly would get $2,800, with an additional $1,400 per dependent for both filers.
4. Keep your career options open.
Women leaving the workforce at astonishing rates is a very real problem socially and economically.
However, I am generally optimistic that this trend could improve over time as businesses open and new businesses emerge, and kids go back to in-person school full time.
If you have been laid off, or forced to stay home due to a lack of childcare, I encourage you to keep your options open by maintaining a professional network or picking up a side hustle. Maintaining a professional network looks different for everyone, but some examples include staying in touch with former colleagues and managers, joining professional organizations, or reaching out to professionals in fields you are interested in through professional networking sites such as LinkedIn. You never know who may be looking to hire in the future that could think of you.
As for a side hustle, this can both help bridge the gap financially, but also allow you to explore other fields and gain skills that may translate to full time work or your own business in the future.
Hang in there.
Over the past year, our lives changed in big ways. Women have been feeling the brunt of these changes, as we’ve had to assume more roles, with less support.
It has not been easy, and the new norm may be here to stay for a while longer. That being said, there’s light at the end of the tunnel as more vaccines are distributed, another stimulus check may be headed your way, and kids start going back to school.
In the meantime, take the steps outlined above to help you keep moving forward and empower yourself financially.