Did you know that women tend to outlive men, but they often live on less money than their male counterparts? It’s not fair, but that’s the way it has been for generations. However, there are ways to change this for the future. This blog won’t blame men or complain about inequality. Instead, we’ll talk about the facts and explore how women can empower themselves to invest just like men. This blog is for anyone who wants to take control of their finances and invest in their future!
Facts About Women and Investing
Did you know that only 48% of women invest in the stock market, compared to 66% of men? That’s according to a recent survey by NerdWallet. It’s a shame because investing is the best way to grow your wealth and ensure financial independence and retirement success. Women struggle with investing more than men, and we need to address this head-on. More and more women are heading into retirement single or widowed with much less long-term wealth than their counterparts. It’s crucial for future generations of women to start investing now.
One reason women invest with 20% less money than men is that they earn 80% of what men earn. It’s an outdated and unfair pay gap that needs to change. Unless women fight for the other 20%, we may never see it.
Women are much more likely than men to put their careers on hold to raise a family, which leads to an income gap in social security and investments. Additionally, women tend to face more health-related bills as they age because they outlive their husbands, who have a shorter lifespan.
An S&P Global survey found that only 26% of women have money in the stock market, while a BlackRock survey found that female investors keep 68% of their portfolio in money market accounts, CDs, or Treasury bills.
How Gender Inequality Affects Female Investors
It may seem like twenty cents less on a dollar doesn’t mean much, but in an eight-hour day, that adds up to $1.60 less, $8.00 less a week, and $416.00 less a year. That can mean two weeks to a month’s worth of groceries or half a mortgage payment for many women and families.
Let’s say Joe and I have the same job, but Joe gets paid twenty cents more than me. That’s not fair (that’s a topic for another blog post).
So, Joe makes $25,000, and I make $20,000. We both put 9% of our income away for retirement. At the end of the year, Joe will have $2,250, and I will have $1,800. That means I’ll have $450 less than Joe at the end of the year. Fast forward 25 years to our retirement. Joe and I didn’t touch the money we saved, and Joe has $56,250, whereas I have $45,000. That’s an $11,250 difference. That’s a lot of money. At this point, I might consider marrying Joe or taking a closer look at my investment options!
Since gender inequality isn’t going away anytime soon, women need to think carefully about how they invest their money. Even though they may not have as much money to invest, they can still have as much money at retirement by making wise investment decisions.
The Effect of Career Gaps on Women’s Retirement
In her book Lean In, Sheryl Sandberg discusses how 43% of the female workforce leave to raise a family. Women’s roles in today’s culture also often involve eldercare duties later in life. Both of these come at a financial price for women, particularly those who are single or widowed. For example, if a woman leaves the workforce to have a child and returns when that child is in high school, she is out of the workforce for ten years. If she works with Joe and me, she has lost a possible $200,000 in potential income and her 9% ($18,000 mattress money) for investments. The more children she has, the greater the income/investment gap becomes. This is a significant loss of retirement investment funds for her, her spouse, and her family.
As she gets older, one or both of her parents may require care giving, and even if she splits this responsibility with one or more of her siblings, she will lose even more potential retirement income at a time when she needs to ensure she has as much as possible for her retirement. Planning is crucial even at a young age.
The past year has shown that anything can happen. Many people have lost investment income due to the pandemic, and females, especially single females, have been particularly impacted. The loss of employment income and the need to stay at home with children has taken a year-long toll on financial independence and retirement investment. Unfortunately, most of us may not recover the lost investment funds and will have to find a way to make up for them or do without. This is not just a female issue; it affects anyone affected by the pandemic’s economic effects.
Obstacles Faced by Women
In Fidelity’s 2017 study of women and investing, 88% of women expressed interest in investing in the stock market if they had better education in investing. However, most admitted to having little or no exposure to education in money and investing. This is a situation that needs to be addressed. It is important for all children, not only girls, to be educated in finances. Think about it. Would you send your child to the store with one hundred dollars without explaining how to spend some and bring home the change to use later? Then why are we sending our adult children out into the economy without the tools to save and invest the most they can? We are creating economic issues that we will have to face in the years to come. We don’t want a generation with no supplemental retirement income or programs that we will have to fund to help them through it! We face a self-made crisis if we don’t start ensuring that the next generation knows how to retire. (If you haven’t read my blog on Pension Portability, you should read it after you finish this one).
In the BlackRock study, women invested mostly in cash-based investments (Treasury bonds, CDs, and money market funds); only 26% of women in the study invested in the stock market. As a result, 68% of these women are missing out on a large portion of investment earnings that come with some risk. Diversity is the key to investment income; without it, these women fall short of their intended retirement goals.
A SoFi survey of millennial women identified 56% of these women as stating fear held them back from investing. Not only was I surprised by this, but I was also perplexed that this group of females that has had a lifetime of internet exposure chose not to Google “investing”. How is it that 56% of a whole generation did not Google this?
Most parents want their children to have what they didn’t, which means they need to be investment savvy where we were not. Granted, not every young adult wants to have this conversation, so start it when they are old enough to understand money. Remember, you live what you learn. If you want your children to be good with investing, you need to expose them to it at a young age, not as they go off to college.
What Women are Doing Right
According to a Fidelity study, women save 9% of their paychecks while men save 8.6%. Women also invest 1% more in workplace 401ks than men. Despite earning less and having less to invest, women save smaller amounts of money and invest some of it. Imagine what they could do with education and confidence in investing! This could be a massive boon for the stock sector.
In addition, women are earning 1% more than their male counterparts. According to Openfolio, women investors have outperformed men in 2014, 2015, 2016, and 2017.
The same study showed that in 2015 (a rough year for the stock market), men lost an average of 3.8% while women lost only 2.5%.
Goldman Sachs found that 43% of female-managed mutual funds outperformed 41% of male-managed funds. While women don’t possess some kind of investing magic that men lack, they follow some investing rules that men don’t. Women don’t react to market fluctuations as impulsively as men; they are less likely to change their asset allocations and trade as the market fluctuates. The investment community approves of both methods. Men tend to check their investments five times a week, whereas women check them as little as three times a week, which may explain why men trade more frequently.
One interesting part of the NerdWallet study showed that 66% of women vs. 55% of men chose to have an investment professional manage their account. Some women had multiple investment accounts and found it easier to have one person manage them all, while others cited a lack of investment knowledge but recognized the need to save for retirement. Women recognize the need to save for retirement and the need for financial help when they lack the skill and knowledge. With a little more knowledge and money, women could be well on their way to financial independence.
How Women Can Own Investing
Hey there! If you’re a woman looking to take ownership of your investments, you may find that working on the gender gap and advocating for equal pay and salary raises can help you get there. It may seem daunting, but it’s definitely achievable! A lot of women have chosen not to be assertive in their pursuit of financial independence, but with some hard work and determination, you can find the balance you need to make a change.
It’s important to remember that your longevity and health go hand in hand. You’ll want to save as if you’ll live to be one hundred and prepare for the possibility of illness as you save and invest. While you can’t plan for everything, using some common sense in preparing for the future can go a long way.
Investing can be intimidating, but education can help ease your anxiety. There are so many resources out there, like Google tutorials and other educational materials, that can help you learn more. Don’t be afraid to read and study if you need to. Remember, knowledge is power, and when it comes to investing, it can lead to financial independence and a more secure retirement. Starting small–dipping your toes in the waters–can help you get started. You have to start somewhere if you want to build up that nest egg!
Diversifying your portfolio is key to maximizing your earnings. While it’s true that women may shy away from risk, taking some calculated risks can be necessary to achieve your desired result. Try taking some risks earlier when you can afford it and use those experiences to invest in safer options later on.
Investment firms are starting to recognize the importance of women in investing and are creating investment classes and programs specifically for women. Take advantage of these opportunities! Consider starting an investing club with your sisters and friends to generate a dialogue about investing and share knowledge. Even throwing five bucks into a platform every couple of weeks with friends can create some friendly competition while building a portfolio. Investing and sharing as a group holds lots of perks. You may even want to involve your kids in the process to teach them about financial responsibility!
Remember, just because you retire doesn’t mean you have to stop investing. There are plenty of low-risk investment options to choose from that can help your money continue to work for you. Even a bad investing experience can be a great learning experience. Your financial future is important, so don’t be afraid to take risks and seek out opportunities!
