GUEST BLOG: Women & Wealth
Six factors why I’m on a mission to get more women investing.
Google ‘investing images’ and you’ll have to scroll down quite a bit before you see a woman in the image. We know there is a gender gap when it comes to investing, but why is it crucial to close this gap?
Well when women win more, society wins more. When women feel empowered with their money, they invest not only in themselves, but in their communities and families, improving living conditions for generations.
Unfortunately, women encounter financial dilemmas over their lifetime that men just don’t have to worry about. By addressing these challenges, I hope to help women realize that the time to start investing is now.
6 Factors That Affect Women’s Wallets
The wage & income gap
Longer life expectancy
Relationships & divorce
Pink Tax & cost of personal care
These factors are rarely addressed by traditional areas of finance like banking or investing firms- a result of a male dominated financial services industry.
After years working in the private bank of my firm, I realized 95% of the people around me were men. Not only were my colleagues men, but the majority of my clients were men. Typically once I had won the relationship with the husband, I would only meet his wife… when we needed her signature.
This became crazy to me. Why are women still deferring to men? Why are they not more involved in the decision-making when it comes to money? And why are we not addressing & discussing the issues that affect women, so we can prepare them and help them overcome these challenges?
The more we can talk about these issues and shed light on the challenges that women face — the more we can find solutions and help women take control over their financial future.
1. The Wage & Income Gap
As of 2020 the gender pay gap in America is 84%. For every $1 that a man earns, a women earns only $0.84. May not sound like a lot when we’re looking at a dollar but try this. If a man is earning $100,000/ year then his female colleague (who likely has similar abilities & works just as hard) earns $84,000. Wow. There’s a cumulative $1,055,000 lifetime earnings gap between men and women at retirement age, but this can be higher for women of color.
According to American Progress the largest contributions to the gender pay gap include:
Difference in industries. Traditionally, women have been funneled into lower earning industries or job roles. Think about the traditional images of a male doctor and a female nurse, a female teacher and a male college professor or a male CEO with a female secretary.
Difference in years of experience & hours worked. As of 2019, only 19% of civilian workers had access to paid family leave through their employers. Women often take the lead when it comes to caring for family and other unpaid obligations and are disproportionately driven out of the workforce, lowering their years of experience. Additionally, women often work part time to accommodate for caretaking.
Straight up discrimination. Gender-based pay discrimination was outlawed in 1963, but is still common practice at many firms.
What can be done?
This is a huge issue that will only be fixed with the cooperation of public organizations, private companies and government. Small steps that can make a difference include promoting pay transparency both inside and outside the office and lobbying for practices within your office that promote diversity, female leadership, paid leave and work-life balance.
2. Longer Life Expectancy
On average women live 5–7 years longer than men, which means that their money needs to last longer as we will live more ‘non-working’ years. In every financial planning session with male financial advisors, I would hear them tell women that they would be living longer, but wouldn't ever address any of the challenges of this situation.
This could be a particularly important issue for millennial women. As birth rates decrease, by 2034 there will be more people over 65 years of age than under and the majority of those older individuals will be women.
Women are more likely to live alone as elders and may not always have family available to help care for them in old age. Investing early, and consistently, is one solution. Obtaining Long-Term Care and other applicable insurance policies are a must. It’s imperative that women pay attention to estate planning.
3. Relationships & Divorce
The divorce rate in America continues to stay around 50%. Divorces can negatively affect women in a variety of ways, especially if there is large income spread between spouses. A recent census survey showed that 20% of recently divorced women are in poverty, compared to only 11% of recently divorced men.
In situations where children are involved, most women who keep custody keep the family home, along with the mortgage debt, even if they don’t have the necessary income available to pay. This debt is compounded with debt that may be taken on to cover lawyer’s fees and other expenses that are related to navigating the challenges of divorce.
In addition to divorce, a woman's relationship status tends to greatly impact her finances. As single women, we’re often told to ask a father or brother for financial advice (not another woman). As of 2018, 56% of married women leave investment and long-term financial planning decisions to their husbands, and 85% of women who defer to their husbands believe their spouses know more about financial matters- as was the case with many of my former clients.
Women need to be encouraged to speak more about financial topics in general, take ownership & control of their money early in life, and always be aware of what’s happening with joint finances. Additionally, keeping some money separate, even when in a committed relationship or marriage can help foster trust and independence.
The most recent study done on the cost of raising a child estimates the lifetime cost of raising a child for 18 years is $12,980 per year. To put this into perspective, that’s 18% of the average dual- income household and 28% of the average single mom’s take-home income. Most of these costs are associated with housing, food and childcare. Unfortunately women, especially single mothers, shoulder the majority of these costs.
5. Pink Tax & Cost of Personal Care
Gender-based pricing, or “pink tax,” is the upcharge on products traditionally intended for women that only have slight differences from the same products that are marketed to men. Some common examples are face wash, body wash, razors and shampoo. A recent study showed that products marketed for women and girls cost 7% more than comparable products marketed to men and boys. Over time that adds up to over $1,300 each year. That’s over $286,000 invested over a woman's lifetime- which we already established is so so important because of our longer lifespans!
The Pink Tax also extends into clothing and make-up. Women are expected to dress and appear made-up in a particular way. The costs associated with keeping these appearances adds up over a lifetime. In addition to the Pink Tax, most states still tax feminine hygiene items & diapers. These are taxes that are not paid by men and, again, add up over time.
With all of the extra expenses women encounter over time, is it any surprise that women tend to go into more debt than men?
On average, women hold 9% more debt than men. This includes student loan debt. Women hold 66% of the national student loan debt, and also take longer to pay back, due to some of the factors we’ve listed above. Learning how to track your cash flow & net worth early can help you manage debt and spend with more intention.
On to the good news!
Ok, I get it. These factors can make it seem like every statistic is against us, so how are we ever supposed to get ahead?
Here’s the good news: Women are extremely smart, resilient, creative & disciplined.
This means when women do decide to take control of their finances by tracking their cash flow, making goals, implementing financial strategies, saving & investing- we do it better!
Multiple studies show that when it comes to investing women’s portfolios performed better than men’s by 40 basis points, or 0.4%. Women do more research before investing, trade less often, are more likely to take on the appropriate level of risk and listen to, and implement, financial advice.
So why are only 26% of women invested in the stock market? Most women report having low confidence in their investing abilities & fear about losing money in the market. I’m on a mission to change this.
We know that women who take control of their money, who invest early, and consistently, to build their wealth can avoid many of the factors discussed above.
Additionally, women who are financially secure have options. Options to get out of a toxic job, relationship or living situation. Options to provide a better life for their children. Options to help us live with less stress and anxiety. Options that allow us to be independent and not reliant on anyone else. Options that we can teach to our sons and daughters.
If you’re looking to build more confidence around handling your money, accomplishing your financial goals & investing to build wealth- working with a finance coach can help. As a finance coach I teach women how to make managing their money easy. I’ll help you create value based goals and spending plans while providing encouragement & knowledge to increase your confidence along your way to building wealth! You can learn more by booking a conversation with me, finding me on Instagram @holistic.personal.finance or visiting holisticpersonal.finance/coaching.
Hi, I’m Genevieve and I’m a financial wellness coach. I use my experience working in financial services & investment banking to teach people how to save more, borrow wisely & invest to build wealth. My goal is to help empower you with easy to use information about all things personal finance so you can take action and balance your money with all of the wonderful things life has to offer!