Managing finances has historically been seen as a task for men, leading to generations of women staying on the sidelines when proactively investing and planning for the future.
This trickle-down effect has created a sizable gap between the number of men and women actively investing and has created barriers to financial wellness for women.
The tide is beginning to change. As of 2023, 60% of women were investing in the stock market, and two-thirds (68%) were saving for retirement. However, there is still a wide gap between the current state and total financial equity—women’s investment account balances are 44% lower than men’s, which is attributed to the lack of disposable income to invest from the gender pay gap.
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The Federal Deposit Insurance Corporation (FDIC) cites the lack of encouragement for women to participate in the stock market as the key factor to the investment gap. It suggests that the lack of encouragement stems from the perception that women are less interested in finance and investing.
The price of non-participation in the stock market can place women at a severe disadvantage to men financially long-term. Bank of America’s 2024 Workplace Benefits Report shows that 53% of men currently report good or excellent financial wellness, compared to 36% of women who feel the same.
Women feel ill-equipped to invest effectively despite being high performers
Despite these challenges, women’s investment portfolios outperform men’s based on Fidelity Investment’s October 2023 study, “Women Tapping into Their Financial Superpowers.” However, it’s been noted that the reason for women’s success may be their lack of confidence: 53% of women say they do nothing and wait out market volatility, as opposed to 41% of men.
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Women are less risk-averse, tending to buy and hold stocks long-term to wait out volatility. This is the golden rule for investing, yet women only seem to utilize it due to a lack of investment confidence. Only 43% of women feel prepared to handle future dips in the market, as opposed to 63% of men.
Although 68% of women save for retirement, only 52% feel knowledgeable about investing their savings to prepare for retirement.
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In fact, two out of the top five biggest financial concerns women have are rooted in a lack of knowledge and empowerment:
- 40% think they should be doing more with their finances than they currently do.
- 39% are worried about saving enough money to retire.
- 37% of women are stressed about paying off debt.
- 29% are thinking about how to tackle health care debt in retirement.
- 24% are worried about how to invest their savings to meet financial goals.
Closing the gap
Ensuring that research, budgeting tools, and financial planning advice are easily accessible is a surefire way to increase financial interest and literacy among women.
Related: The average American faces one major 401(k) retirement dilemma
Teresa Greenip, CFP and Senior Manager in Wealth Management at Aspiriant, notes that women can position themselves for financial success by staying vigilant about tracking their spending habits. Awareness of monthly income and expenditure provides the framework for a realistic budget to work towards and prevents passive overspending.
Once you have a grasp of what you can comfortably spend each month while living within your means, prioritize building an emergency fund to cover 3-6 months of living expenses and paying down high-interest rate debt before setting aside money to invest in a diversified portfolio.
To address the investment and financial wellness gap, Greenip suggests first closing the knowledge gap within the finance industry.
“The finance industry, and in particular, the wealth management profession, has historically been overwhelmingly male-dominated,” she said. “In addition, many advisors use jargon and complexity, unintentionally and intentionally, to inflate their perceived level of expertise. These factors have deterred many women and minorities from joining the finance conversation.”
“At the same time, women and minorities are positioned to control an ever-growing share of wealth in the United States,” Greenip added. “Women are expected to live longer than men. To close the knowledge gap and, ultimately, the wealth gap, we need to start by increasing gender and racial diversity in the finance profession. And if we can cut through the jargon and complexity, everyone, male and female, benefits in spades.”
The data agrees: less than 25% of women have a written financial plan, and those who do not cite not knowing where to start or lack information as the barrier. Fidelity also found that women would feel empowered to start investing if:
- There were no fees (31%)
- They had a straightforward checklist to get started (25%)
- They had a trusted resource to make decisions and manage investments on their behalf (23%)
- They were able to speak to a financial advisor trained to help their specific financial needs (22%)
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