According to the U.S. Department of Labor, women earned 82.3% of what men earned in 2020. The wage gap was even wider for women of color, as Black and Latina women earned only 65% of white men’s earnings. And the financial gender gap only starts here; because they make less than men, women also fall behind in overall wealth and investments.
One major reason for this is that women are more likely to pause their careers to become caregivers. When they return to work, they often are forced to take lower positions and less pay. What’s more, women also are more likely to have higher medical costs than men — no matter their age. On top of that, women are often more conservative investors than men, keeping many of their investments in cash or cash equivalents (such as money market accounts and certificates of deposit) and away from stocks. In fact, women’s portfolios are 68% cash on average compared to only 59% of men’s. And only 21% of women are willing to invest in stocks, which is how long-term returns are generated. So women’s savings are often worth less over time — and that’s not great when you consider that women live longer than men and need more savings as they get older.
In short, the state of the financial gender gap encompasses more than just wages. It refers to women’s entire financial well-being. The issue is systemic, and it seems almost hopeless when you look at all the facts. But there are steps you can follow and financial planning resources for women that you can take advantage of to make up for some of the losses, help close the financial gender gap, and get peace of mind about the future:
1.) Put Your Financial Health First
Many women typically put everyone else above themselves, but it’s important to remember self-care. Of course, relaxing and taking time to do the things you love are important, but self-care also includes taking care of your financial health. It might be tough to start looking at your finances closely and overcome the financial planning issues women so often face, but you will be grateful that you invested in your future.
This requires thinking ahead. What do you want to achieve in the future? Buying a new house or car? Traveling? Starting a business? What does your ideal retirement look like? Visuals (like a vision board) can help you set and reach those goals.
Once you know where you’re hoping to go, set up savings for each of those goals. For example, be sure to enroll in your retirement account at work if you have access to one. Consider contributions to an IRA or Roth IRA to also help fund your retirement goal. Set up automatic savings from a bank account to a brokerage account for mid-term goals (think buying a house or a big trip). The more you can put those savings goals on autopilot, the more successful you’ll be in achieving them. It’s almost like starting a regular exercise routine: As you make progress, you feel motivated to keep going. Whatever you decide to do, just start; you can start small and see big results over time.
2.) Seize Professional Opportunities
Now is the time to provide for yourself and your future. The wage gap is only part of this puzzle, but it’s a huge component of financial empowerment for women. If you see better opportunities for your career (and your wallet), don’t be afraid to take action. Apply for higher-level jobs — even if they are a little outside of your comfort zone.
There’s a saying out there that men are likely to apply for a job even if they only meet 60% of the qualifications, but women only apply if they meet 100% of them. The most important thing is to advocate for yourself. Be confident in your abilities. Even if you aren’t applying for other jobs, approach your employer regularly and make your case for a salary increase. You’ll never know until you try. And it might bring you one step closer to closing the financial gender gap.
And if you decide to take a step back from your career to raise a family, travel, and so on, try to keep your foot in the door. Even working part time might allow you to continue to contribute to retirement accounts and help you keep up your skills. It’s also important to keep in contact with strategic partners who can help you get back into the workforce whenever that time comes.
3.) Take Charge of Your Long-Term Investments
Even though many of us women might doubt our money management abilities, women investors tend to outperform men. That’s because women are more apt to put their money into an investment account and let it sit over time, which is a better approach than moving the money around a lot (something men tend to do). The trick to long-term investment success is to diversify your portfolio — in other words, keep money in stocks in multiple industries, bonds, commodities, and other places — and then don’t touch it.
Another important long-term investment strategy involves compounding. Compounding is like a superpower because it enables you to earn on your earnings! Say, for example, that you invest $10,000 in an account that earns 8% annually. Interest increases your earnings each year, even when the interest rate stays the same. After 15 years, that account would be worth more than $30,000. After 30 years, it would be worth more than $100,000. With time on your side, compounding can work its magic — and you don’t have to do anything besides stay calm and keep your money in the account, even during market downturns.
The fact that we even have to deal with a financial gender gap is overwhelming and discouraging, but with these steps, you can overcome some of the common financial planning issues women face. And by reading this, you’ve already done the hardest part: getting started!
- How To Close The Gender Pay Gap Once And For All
- Stop The Gender Pay Gap And Make More Money, With Mika Brzezinski
- How Dasha Kennedy Is Disrupting The Racial And Gender Wealth Gap
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