Andrea Lee | April 3rd, 2023
Investing and the Gender Gap
You may be aware of the gender wage gap or the pink tax, but perhaps the gender investing gap is less familiar. The gender investing gap profoundly impacts women's financial health, but there are ways women can bridge this gap.
What is the Gender Investing Gap?
Men invest at a far higher rate than women. Women keep as much as 71% of their assets in cash. The gap is enormous. If women invested at the same rate as men, they would account for an additional $3.22 trillion of assets under management.
And while overall investment in the stock market is low, the difference between men and women is more than double. Some 23% of men invest in the market compared to just 10% of women.
Reasons for the Gap
There are several reasons women fall behind men when it comes to investing:
Lack of knowledge and confidence: Investing comes with its own vocabulary, and for the uninitiated, it can seem like a foreign language. While successful investing doesn't require an expert level of knowledge, it does take some understanding, and the learning curve can be steep.
Male-dominated industry: Finance is a heavily male-dominated industry. This can feel unwelcoming to female clients. A study found that 86% of professional asset managers say the default investment client is male, and 73% said their firm's investment products are aimed primarily at men.
Risk aversion: Women tend to take fewer risks than men, and investing can seem risky, especially when you don't have much knowledge on the subject.
Less money: The gender pay gap persists. Women earn an average of 82% of what men earn. Women simply have less money to invest.
Less time: Anyone can learn how to invest, but it does require time. And women have less free time than men as they're responsible for a greater share of household duties and childcare.
The Impact of the Gender Investing Gap on Retirement
Retirement is typically the primary reason people invest, and women's lack of investing has a tremendous impact on their life in retirement. Women's retirement income is about 83% of men's, and women are 80% more likely to become impoverished after age 65.
And on average, women live five years longer than men making a lack of retirement funds an even larger problem.
Health care is often one of the most significant costs during retirement, and women typically need more than men. It's estimated that a woman who retires at 65 will need about $157,000 for future health care costs, while men will need about $143,000. Neither number includes long-term care, something else women typically require more of, and which can run to six figures per year.
Cash sitting around in a savings account earning less than 1% interest is just not going to meet these needs. Women must invest.
How We Can Close the Gap
As with many problems, education is a big part of the solution. Neither gender in the US gets a robust financial education which needs to be addressed. Demystification is a big part of that solution. Investing isn't complicated; it's been made complicated over the years.
And the industry needs to be more welcoming to women, both as professionals and clients. Just as some women prefer a female doctor, some women prefer a female financial advisor.
Issues around investing and money, in general, should be more openly spoken about. The taboo around these topics keeps people in the dark, afraid to ask questions or seek advice even from professionals.
If you have questions about investing as a woman, coreVISION is here to help.