Can We Close The Gender Investing Gap?
Why don’t women invest? That’s a question coming up more recently in an effort to define ways to fix what’s being called the gender investing gap. A 2018 report from S&P Global paints the picture: just over one-quarter of women in America invest in the stock market at all, and most of them invest less than their male counterparts.
And besides the obvious benefits of investing for their own future, other research has found that when women do invest, it’s usually at a high rate of success. A 2017 project identified that their performance could exceed that of men by as much as 40 basis points.
Combine this with the impacts of the gender pay gap and the long-term ramifications are serious: women tend to outlive men but earn less and enter retirement with less saved than men.
The problems with low investing activity from women are multi-layered. For example:
- With little money left over after paying their bills, there’s not a lot to work with
- The generation that has the most potential to impact their wealth and their retirement due to their current place in their careers, Millennials, don’t show much change in terms of female investment when compared with other generations. Less than half of Millennial women feel confident in their ability to invest.
- Women retire up to two years earlier than men, meaning two less years of earnings and savings.
- Women have more exits and pauses in their careers due to caregiving for children or aging/ill parents.
- Historically, women tend to invest in stocks that don’t perform as well as those invested in by men.
- A woman’s peak earning age is 11 years younger than a man’s.
- Over a 40 year career, a woman will make $850,000 less than a man overall.
So what can be done? More education and empowerment are certainly at the forefront of tackling the issue.
Cracking the Confidence Problem
The earlier women can be introduced to the benefits of investing and finances overall, the more likely their chances are of feeling competent and even confident around these kinds of issues.
As parents of girls, there are a few things adults can do to help introduce the concept of positive financial habits early on, including balancing the checkbook, doing taxes, and talking about investing basics. For example, find a tech company or product your daughter likes and uses products from- discuss how making investments in companies can yield returns and teach about basic concepts like risk at that time.
There’s an educational role in broaching personal finance, too, but parents might have to pick up where the classroom leaves off. Some high school business classes teach investing and use mock investing competitions to get students grounded, but the truth is that those lessons can start even sooner.
Finding the Right Information and Partners
It’s a myth that investment advice needs to be completely outsourced to a financial professional. Many women aren’t doing that anyways, but it does provide a fast track for getting support with your portfolio.
Thanks to so much free content available and even more out there when it comes to books, it’s easy to explore the investing world quickly and arrive at a solution that works for you. Besides, knowing the basics will make for a more effective relationship should you choose to work with a financial professional in the future. You’ll know the questions to ask and the strategies you want to provide input on.
Compound Small Actions for Big Impact
The magic of compound interest is what makes investing so powerful. Far too many people hold off on investing at all because they’re afraid they don’t have enough money to set aside.
But much like how compounding interest can work to make even small regular investments build up to a lot over time, the same is true for small actions with investing. Whether it’s taking your own first steps towards saving for your future or educating your daughters about good financial fitness, it all adds up.