How Women Can Close the Gender Wealth Gap

by | Mar 8, 2024 | Financial Planning, Women and Finance

As March is Women’s History Month, I would like to review the very important women-centric topic; the gender wage gap. The most recent data, little changed in decades, says that women remain behind at 82-cents for every dollar a man earns. I feel compelled to share how much of an impact this can make in all women’s future financial security, and to share my advice for closing the gap.

First, I think it is important to note that the gender wage gap can further be broken down by race.

White women earn 83-cents, Asian women earn 93-cents, Black women earn 67-cents, Native women earn 55-cents, and Latina women earn 57-cents for every dollar that a man earns. This is terrible news. Unfortunately, multiple factors can make it even worse, resulting in the gender wealth gap, which is the lack of wealth needed to live comfortably in the future.

Some of the unique challenges that women face every day can have a compounding negative effect on their ability to successfully achieve their future financial goals.

Women are often the caretakers in the family. This means taking time off work to care for children and aging parents. This time off means fewer opportunities for contributing to workplace retirement plans (for example, a 401(k) plan), and fewer opportunities for pay raises and promotions.

Additionally, women statistically live longer than men, and therefore their retirement portfolio would need to be larger than a man’s in order to last longer.

The COVID-19 pandemic is exacerbating the already poor condition of women’s future financial security, especially for Black and Latina women, because it has profoundly affected sectors more commonly filled by women such as hospitality, travel, and education. Homeschooling has become a requirement in some locations, and women have taken on the bulk of that responsibility. These factors are leading to a vastly wider gender wealth gap.

Compounding interest and compounding returns are the keys to successful investing. Saving and investing are the keys to future financial success. However, women are often busy managing their careers and their families. It is for these reasons that women often do not make time to manage their own finances and delegate it to their partners. It is not a lack of competence, but often a lack of time and sometimes a lack of confidence.

Another concern for women’s financial security is that 74% of women die single. Divorce and death (widowhood) profoundly impact women’s future financial security, especially when they are not the financial managers in their relationships.

While money is the #1 stressor for women, taking action is their #1 source of confidence.

So, what can women do to close the gender wealth gap?

  • Ask for a raise or a promotion.
  • Establish and maintain an emergency fund (3-6 months of cash that is only used in an emergency or crisis).
  • Maximize your opportunities in pre-tax or tax-deferred investment accounts; retirement, health and education accounts such as 401(K), IRA, HSA, 529, etc.; especially if there are matching opportunities.
  • Start having money conversations with your partners, parents, and kids.
  • Understand where your money is going every month.
  • Make S.M.A.R.T. (Specific, Measurable, Achievable, Realistic, and Timely) goals for saving and investing, decreasing expenses, and controlling debt.
  • Protect yourself and your family through estate planning (Will, Durable Power of Attorney (POA), Healthcare Proxy, Living Will, etc.) and with insurance (Life, Health, Property, Disability, etc.)
  • If due to time or interest you delegate your financial responsibility, make certain you delegate to someone you know, like and trust (a partner or a qualified advisor). If your partner manages your finances and delegates some of those responsibilities to advisors, make sure that they are qualified (CFP®, for example) and experienced.

Invest in your future financial security now. Your future-self will thank you.