The value and purpose of having money has expanded beyond just basic numbers. Money is not just about math; it represents three core aspects of life: independence (autonomy), safety (security), and the opportunities that come with having money at your disposal. Unfortunately, millions of women across the globe are unable to have the good fortune of a truly fair shot at financial success because their success is determined by systemic factors rather than individual choices. Conversations about women's finances have shifted from "marginal" to "mainstream" as we become more aware of the gender wealth gap, ongoing income disparities, and the long-term financial precariousness many women face.
The findings reported by the U.S. Census Bureau, the Federal Reserve, and the Bureau of Labor Statistics (BLS) all indicate that women continue to earn less, save less, and when retired, have fewer assets than men, regardless of whether or not they participate in education and/or work in the same number of hours as men. This lack of understanding is the first step toward taking back control of their financial future and providing tangible ownership to create positive change.
The purpose of this guide is to examine the underlying reasons for financial inequalities among females and how employing tactical financial plans for each female will help to close the financial inequality gap, by making one well-informed decision at a time.
The gender wealth gap is connected to differences in financial accumulation between men and women throughout their lives, including cash in savings accounts, stocks, bonds, homes, and pensions. Like income inequality, there is ongoing discussion of the relative disparity of wealth between the genders, but the wealth gap is fundamentally larger than the pay gap and has a far more lasting effect on financial stability.
The U.S. Census Bureau reports that women earn about 82-84 cents for every dollar that men earn, and this imbalance is even greater for many women of color. While it is true that women earn less than men on average over the course of their careers, the pay gap widens, leading to diminished individual wealth at retirement. These compounding effects include:
The cumulative effect of these is explained by each individual woman losing hundreds of thousands of dollars over a 40-year working period will ultimately solidify the financial disparity experienced by women long into retirement.
Worth a Look: How to Build an Emergency Savings Fund to Protect Yourself?
The time women spend away from the workforce to provide care for children, elderly relatives, or other family members is much higher than that of their male counterparts. The unequal distribution of caregiving responsibilities is further supported by data from the U.S. Department of Labor, which indicates this is a barrier to women receiving equal opportunities for promotion, wage growth, and retirement savings.
In essence, interruptions to women’s employment due to caregiving are a significant contributor to the gender wealth gap, impacting their day-to-day earnings and their long-term ability to build wealth.
While progress has been made, the financial barriers women face remain primarily structural. These barriers are not due to a lack of capability but rather due to access, opportunity, and systemic bias.
Women are generally more conservative investors than men and therefore tend to be more focused on security than on growth, according to FED research. Although a conservative investment strategy generally reduces risk, it also limits long-term growth potential and can create fewer dollars available to women during their prime earning years, because they begin saving less from a younger age than men (though both are saving for retirement).
It is important to note that this is NOT due to a lack of financial literacy or education; instead, it is largely due to three factors:
Because women live longer than men, they will ultimately have to make their retirement accounts last longer. This means that women need to develop a sound investment strategy to bridge the financial gap created by the financial disadvantages they face due to the issues outlined above.
According to data from the Consumer Financial Protection Bureau, women tend to have higher levels of student loan debt and access to lower credit limits than men. As a consequence of this disparity in access to certain types of financing, women experience a direct effect on home ownership, entrepreneurialism, and wealth accumulation. When high levels of debt are not managed appropriately, they limit mobility and widen the gender wealth gap. Additionally, income inequality further contributes to these outcomes.
On a Related Note: Financial Habits for Smarter Money Choices and Wealth Growth
Intentional, informed women’s financial planning can be one of the most powerful vehicles for economic empowerment. Systemic change is critical, and at the personal level, strategy is critical.
The CFPB states that starting your financial planning journey early will greatly increase your chances of building emergency savings and regular investing. For women, starting early adds a strategic approach, using income(s) to directly address income inequality. Key Areas of Focus include:
The Federal Reserve indicates that your wealth will grow based on your continued participation in the market rather than how often you buy and sell and/or wait to invest. By simply investing earlier and holding on to their investments, women can close their income gaps by the time they retire.
By working with fiduciary advisors, using employer-sponsored retirement plans, and ensuring that the investments you make align with where you are in your life, you can greatly reduce the gender income gap and achieve financial independence.
Don’t Miss Out: Smart Spending for Financial Control and Long-Term Growth
The discussion among women regarding their financial resources and capabilities has changed from one of limitation to one of leverage. In addition to the existing difference in pay between men and women, existing caregiving duties, and existing barriers to full participation in society, the ability of women to close the existing gender wealth gap will depend on the establishment of institutional reform as well as their individual willingness to establish their financial confidence by engaging in strategic planning, lobbying for fair and ethical financial practices, and intentionally accumulating wealth.
Women today can build their own financial power through their own effort and the collective efforts of women worldwide.
The gender wealth gap reflects the accumulation of long-term assets rather than wages earned. The size of the gender wealth gap will have a significant impact on an individual's financial independence and the security of their retirement plans, whereas the pay gap is generally a more accurate indicator of long-term economic stability for women.
Common financial obstacles women face include: lower lifetime earnings; disruptions in their careers due to caring for children or elderly parents; higher total debt; more conservative investment patterns; and outliving men by several years due to a longer average lifespan. Together, these challenges create a long-term pattern of financial inequality for women over their working lives
Women's financial planning emphasizes using long-term investment strategies, creating an effective retirement plan, and employing risk management techniques within their financial planning process to alleviate economic income disparities and facilitate wealth creation despite the systemic economic barriers they may face.
Women's financial inequality creates decreased savings for retirement, less available Social Security income, and longer periods of time in retirement than men. Collectively, these factors create a significantly increased risk that women will outlive their retirement savings; however, they can minimize that risk and build substantial wealth by proactively planning and employing diversified investment portfolios.
Government policy affects women and their financial condition through equal pay legislation, retirement program protections, child care assistance, and financial literacy programs; thus, it is a tool to help reduce the gender wealth gap.
This content was created by AI