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The Gender Investing Gap

Every single American needs to have a good overall understanding of personal finance principles. Knowledge leads to good habits and behaviors that result in a less stressful life and more comfortable retirement.

However, some of us Americans would benefit more than others from increased financial understanding: women.

There is a gender pay gap in the US, where women make 82% of what men do. Since most Americans believe this gap is real, let’s not dive into the reasons for it in this post. Rather, let’s focus on the investing gap. Women simply don’t invest as much as men do.

CreditKarma conducted a study about how men and women handle their personal finances:

  • Men are more likely to save a set amount of money each month, while women are more likely to save whatever’s left over after expenses.

  • Men are more likely to put extra money they have into savings, while women are more likely to use extra money to pay bills or reduce debt.

  • Twice as many women as men have less than $400 in total savings, while twice as many men as women have $50,000 or more in total savings.

  • More women than men reported having student loan debt. And 37% of those women owe more than $20,000, while only 23% of men with student loans owe that much.

  • Women are also more likely than men to pay only the minimum amount due on their credit card bills.

  • Only 28% of women surveyed believe they’ll have enough money to retire comfortably, compared to a majority (53%) of men.

  • More men (40%) than women (22%) have invested money in the stock market.

Nearly half the women Ellevest asked in their 2018 survey (45%) weren’t aware that there’s an investing gap in addition to the wage gap. Respondents also underestimated the impact of the investing gap, which starts in the hundreds of thousands for women earning $50,000 to $70,000 a year.

Naturally, the gender pay gap has an impact on the gender investing gap, and closing that gap is going to take a national concerted effort. There’s another factor at play here impacting the investing gap though: education. Of the women surveyed by Credit Karma, 35% said they don’t seek information about personal finance, compared to 84% of men who do seek education around the topic. Just under half (47%) of women surveyed by Ellevest said they know how to achieve their financial goals, while 64% of men do.

Men are more educated and more confident when it comes to investing. While this could lead us to believe they’re better investors than women, they’re actually not. A survey by the Warwick Business School found that women’s portfolios outperformed men’s by 1.2%. Men tended to trade more often than women, which brought on increased transaction costs. Women should therefore be more confident investing than men!

Here are some steps women (or men, really) can take to learn more about personal finance:

  1. Start a non-fiction book club and share what is learned.

  2. Create a “money circle,” where a group gets together regularly over a meal and discuss their relationship with money.

  3. Take classes at a local college or watch free webinars.

  4. Ask friends about how they save for retirement.

  5. Collaborate with their spouse about finances, perhaps through monthly “financial date nights.”

  6. Meet regularly with a financial planner or financial adviser.

Did you know about the investing gap? What other steps can we take to learn more?

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