Over the last 100 years, women and money have come a long way. Learn about the history of women's financial rights, the modern statistics associated with women and money, and why improving women's financial literacy is Family Finance Mom's #1 mission.
While there's endless discussion today of the gender wage gap, the reality is women's financial gains over the last 100 years have been astronomical. There is no doubt there are still gaps to close - but the area where women fall behind the most? It isn't in earnings as much as it is knowledge, literacy and the confidence to maximize our earning and investment power.
A Brief History of Women and Money
Western civilization has long been a patriarchal society. For centuries, women could not directly inherit property. Any property they did own was immediately ceded to their husbands upon marriage. Throughout the mid to late 1800s, individual states passed Married Women's Property Acts and laws granting rights to "separate economy," meaning women had the right to earn and keep their own income, and not be forced to turn it over to their husbands.
But even after getting the right to vote with the ratification of the 19th Amendment in 1920, many women across the United States still couldn't have their own bank account. As recently as the 1960s, American women needed their husband's permission to open a bank account in their own name.
In 1974, Congress passed the Equal Credit Opportunity Act. This ended credit discrimination not only by race, but also against women. Prior to this, a single woman could not get a loan, no matter her income level, without bringing a man to co-sign for her.
For centuries, women were told through culture, tradition and even the law that money was a man's world. It has only been in the last century that laws started to change, and only the last 50 years where women truly had access to all the same financial products as our male counterparts.
10+ Statistics on Women and Money Today
Despite only having access to all the same financial tools as men for less than 50 years now, women have made great strides financially. But as we are all too well aware - there are still gaps to close. The gender wage gap and investing gap are widely discussed, but the biggest of all? The financial literacy gap between men and women. Increasing awareness of these statistics and the drivers behind them are one of the best ways we can work to close the gaps.
Women Get Paid Less Money
Nationwide, women are typically paid $0.80 for every dollar paid to men. This is known as the gender wage gap. It is not entirely attributable to discrimination, though it definitely plays a role. The reasons for the gender wage gap are three-fold.
First, occupational segregation occurs. Men and women, whether by inherent gender bias or self-selection, migrate toward different industries and occupations. Male-dominated industries and sectors, on average, tend to be better compensated than those industries and sectors dominated by women.
Next, the caregiver penalty. Women are far more likely than men to take time off to care for children or family members during their career. This reduces their overall lifetime earnings, their cumulative years of experience, and, even when many women return to the workforce, studies show a persistent motherhood penalty.
These two factors are believed to drive the majority of the gender wage gap. When controlling for job choice and qualifications, the gender wage gap closes to $0.98 earned by women for every dollar paid to men.
Finally, there does remain gender and racial discrimination and bias. How do researchers' know this? Because even when accounting for all other differences - job choice, education level, time unemployed, age, marital status, and more - there is still a statistically significant difference in what women are paid relative to men.
But Women Save More than Men
While women may get paid less than men, the good news is we still save more... at least as a percentage of our income. According to a 2017 study by Fidelity Investments of its customers, women saved 9.0% of their paychecks in workplace retirement accounts vs. 8.6% for men. When looking outside of workplace accounts, at things like IRAs and brokerage accounts, women saved even more, adding 12.4% to their account balances vs. just 11.6% for men.
However, that higher savings rate? It doesn't make up for earning less to begin with.
And Women are Better Investors than Men
More good news. When women invest, we outperform men. The same Fidelity study cited above found women performed better than men by 40 basis points, or 0.4% when it came to investing. While women are likely to take less risk , when we do it is more carefully considered and balanced.
Related Post: Understanding Investment Risk for Women
Women tend to be longer-term, more conservative investors. We trade less, and make fewer rash decisions than men... and it pays off in the form of higher returns.
But Women Invest Less
Despite being better at investing than men, most women just don't do it. According to Sallie Krawcheck, CEO of Ellevest, of all the assets held by women, over 70% is just in cash. Not invested. Earning little to nothing. According to the FDIC, the current national average interest rate on a savings account is just 0.10%. This compares to the annual average return of the S&P 500 of over 9%.
A study by Merrill Lynch found women's #1 biggest financial regret is not investing more of their money. Another survey by the Canadian firm, WealthSimple, found that among university graduates age 30-35, a lower percentage of women than men invested money outside of their employer-sponsored account. And among those who had invested, women invested fewer dollars.
Women Also Own More Student Loan Debt
Increased education among women has driven more women into the workforce and helped close some of the wage gap over the last several decades. Today, 42% of all women age 18 to 64 have a college degree vs. only 25% in 1992. This education gap between men and women has closed dramatically largely because more women than men now go to and graduate from college.
But this has an undesirable consequence too. Women now hold 64% of all student loan debt.
All Compounds into Less Retirement Savings
Heftier student loan balances, the gender wage gap and investing gap compound over time, leaving women with lower retirement account balances. The 2018 annual Transamerica Retirement Survey found women had only $42,000 in total household retirement savings, just 1/3 the median total household retirement savings for men ($123,000). Men were also nearly twice as likely to have more than $250,000 in retirement savings (38% vs. 20% of women), while women were nearly twice as likely to have less than $10,000 saved for retirement (21% vs. 12% of men).
Women More Likely to Live in Poverty After Retirement
As women, we make career sacrifices to care for our families. We are often likely to put the financial needs of our families, like college, ahead of our own retirement. And it leaves us with less retirement savings, while we also have longer life expectancies. The two combined leave women 65 and over 80% more likely to live in poverty than men, and women 75 to 79, three times more likely to live in poverty than men.
Related Post: How Much Money Should I Save for Retirement?
The majority of women are afraid they will run out of money in retirement - and these fears are well founded. The typical retirement today costs $738,000, while only 9% of women have more than $300,000 saved for retirement.
Women Lack Financial Literacy...
FINRA, the regulatory body that oversees all securities firms in the US, conducts a National Financial Capability Study. Women are less financially literate than men, answering only 48% of questions correctly, vs. 58% for men.
Other studies have produced similar results. An American College of Financial Literacy study found only 18% of women age 60 to 75 passed a retirement income literacy test vs. 35% of men.
... and Investment Confidence
Furthermore, women are less confident about money - specifically when it comes to investing. A study by Merrill Lynch asked men and women about their confidence in handling different financial tasks. Confidence levels between the sexes were similar for paying bills, budgeting, paying off debt and even choosing insurance. But when it comes to managing investments, only 52% of women felt confident vs. 68% of men.
Women Control the Nation's Finances
Women already control most of the financial decisions in their families. Most (90%) control their family's daily spending and purchasing decisions, with women making 85% of all consumer purchases in the US.
Women control 60% of the wealth and over 50% of all stocks are owned by women. Women control $14 trillion of our nation's wealth. It's time we better understand what we are doing with it!
While we may not single-handedly be able to close the wage gap, we can all individually take the initiative to improve our financial literacy through education... and prevent it from exponentially expanding into a massive investment and retirement gap.
I started Family Finance Mom after leaving my career in finance and seeing the real-life impacts of these statistics on the women around me. No one was talking about this, and worse than that, women were afraid to. They were afraid to talk to each other about money, to ask questions about financial products they didn't understand, and they felt intimidated by predominantly male financial advisors, who in most meetings, talked to their husbands, not them.
The reality is we learn better and are more apt to trust advice from people like us. So as a fellow mom and woman, who also happens to have a degree and career experience in the mostly male-dominated world of Finance, I am here for moms everywhere. To answer your questions. To appreciate that your money priorities and risk tolerances are different. And to help you build a financial plan you and your family can live with!