In the U.S., men are investing and accumulating wealth at a greater pace than women, fueling the gender investing gap. It is important that women accumulate enough retirement savings since women have a life expectancy of 80.2 years compared to men having a life expectancy of 74.5 years, according to WorldData.info. Below are five Issues and five ways to work toward closing the gender investing gap.
Women must be active investors to accumulate more retirement savings to last their long lives.
If women invested at the same rate as men, there would be an extra $3.22 trillion of assets under management today, and $1.87 trillion additional capital into responsible investments, according to a BNY Mellon Study. There are numerous reasons for the gender investing gap that, as a society, we must work toward bridging. Here are five problems women may face when it comes to investing and how to fix them:
1. Women’s investable income expectations are off
Many women think they need a few thousand dollars in disposable income each month before they invest. The same study found that many women believe the IRS limit for IRAs is the amount they must invest, which isn’t accurate. Also, women who describe their financial health as poor are less likely to invest.
The fix- Financial professionals can help bridge this gap by encouraging women to start investing- regardless of income and at any amount. Fund companies can market that investing consistently; even a small amount can add up over time thanks to the power of accumulation. Financial education at work and in schools are great avenues to illustrate that no income is required to start investing.
2. Investment strategies aren’t always designed for women
Women are motivated by an investment’s impact, for example, socially responsible investments, but often have difficulty finding investment strategies that align with their values. Or, some investments they choose may not produce the consistent positive returns that help women accumulate wealth.
The fix- The financial industry must develop funds and investment strategies that align with women’s values that impact people and the planet. These strategies may produce returns that enable women to be financially confident and provide for those they love and the causes they care about. Also, fund companies must market to women by depicting confident women making an impact on our world and its people through their investing.
3. A gender pay gap
In 2022, for every $1 that men make, women earned 0.82 cents. The U.S. Census Bureau has found that even though Equal Pay Day has brought awareness to the gender pay gap, women would need to work three additional months to catch up to men’s pay. With less money to invest, women may invest less or not participate in the markets due to having fewer investable assets.
The fix- Companies can help close the pay gap by allowing women to participate in leadership and assess their pay and employee benefits programs to be inclusive to all. Hiring third-party consultants to review employee pay, develop programs to reduce hiring biases and pay discrepancies, and implement new policies can help bridge the pay gap.
Developing employee leave programs that benefit women and all caregivers with leave pay when they are absent from work to care for family members. Program benefits, including short-term insurance and a ‘pay bank,’ where employees donate their unused leave to benefit others, can help provide paid leave, and flexible work schedules can become policies.
4. Female investor confidence lags
Many women feel they don’t understand investing. They also feel more comfortable saving in savings accounts or investing in property and less comfortable investing in market-driven investments, according to the BNY Mellon Study. There are also biases in marketing investments to men versus women, which can deteriorate their investing confidence.
The fix- Creating company financial education initiatives and marketing wealth-building programs to women is an excellent start. Encouraging financial professionals to specialize in working with women and encouraging more women to join the financial services industry can help. Awareness in marketing to include women in advertisements, financial education in schools and better communication that women must invest in their futures can help female investor confidence.
5. Women tend to avoid the risk
Women feel less confident about investing in the stock market, alternative investments, and REITs. They often view investing outside their employer’s retirement plan as risky. When it comes to risk tolerance, women also have a lower tolerance to market risk than men:
- 9% of women report a high level of risk tolerance.
- 49% have moderate risk tolerance.
- 42% have a low-risk tolerance.
Source– The Pathway to Inclusive Investment, BNY Mellon
The fix- While risk, performance, and results are part of investor reporting, it isn’t appealing to women. Instead, education and marketing directed toward women about risk, performance, and results must include the reason for investing.
While risk, performance, and results are part of investor reporting, it isn’t appealing to women. Rather, education and marketing directed toward women about risk, performance, and results must include the reason for investing. Many women invest in a cause to make the world a better place, which requires taking some risks.
One thing that may help fix the gender investing gap is for women to invest in their future by consistently saving and investing. Working with a financial professional can help women develop a financial plan and design a portfolio of strategies that align with their values and produce positive returns.
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Tim Padgett has been practicing insurance in the states of South Carolina and North Carolina since 1992. He began with a vision and a goal to help others maintain or improve their current lifestyles as they reach their retirement years and beyond. Contact us to get started today.