Women don’t need (or want) pink-colored financial advice packaged in a dumbed-down way that ‘appeals’ to women. But women experience a different financial reality than men do in many ways.
There are many financial considerations and gender issues that affect women’s finances, such as the gender pay gap; maternity leave, healthcare, and childcare considerations; women being more likely to care for their aging parents; and women statistically living longer.
It turns out that our financial system largely fails to recognize how personal finance is different for men and women. In many ways, this is caused by institutional sexism. For centuries, women were not considered part of the audience when it came to financial advice. In the past few decades, people have realized that women need financial advice as much as men do.
So why is financial advice for women different than for men? Let’s dive in.
Ways Sexism Affects Finances
At its core, institutional sexism is the discrimination of individuals based on their gender “reflected in the policies and practices of organizations such as governments, corporations (workplaces), public institutions (schools, health care), and financial institutions.” (Source) This can take many different forms, but some common examples include the gender pay gap, occupational segregation, and the underrepresentation of women in leadership positions. All of these factors play a role in limiting women’s financial opportunities and security.
On average, the global labor force participation rate for women currently sits at 47%, while the participation rate for men is 72%. In addition, institutional sexism in the form of occupational segregation means that women are more likely to be concentrated in particular sectors, such as child care and food service, which tend to be lower-paid. This can also make it harder for women to negotiate for better salaries and benefits, or to challenge discriminatory practices.
The reality is that women earn 30% less than men, and this gap only widens with age.
Laws and policies, cultural beliefs and practices, and negative stereotypes all negatively affect women’s finances—which plays a profound role in shaping women’s opportunities, income, and wealth. The impact of institutional sexism is far-reaching and complex, but understanding how it affects women’s finances is an important step in eliminating the problem.
Laws And Policies
While sexism is a deeply entrenched problem, there are laws and policies that can help address it. In recent years, In the past years, there has been a substantial focus on the role of laws and policies that can create a more level financial playing field for men and women.
One of the biggest issues that women face is the lack of paid maternity and family leave. In the United States, the Family and Medical Leave Act (FMLA) is designed to help employees balance work and family responsibilities by allowing them to take up to 12 weeks of unpaid, job-protected leave for certain family and medical reasons. However, many women cannot afford to take unpaid leave, and as a result, there often have to make the difficult choice between taking care of their family and keeping their job.
Furthermore, another issue that disproportionately affects women is the United States’ lack of healthcare policies that address the unique needs of women. Women pay more for healthcare while simultaneously receiving less care. In addition, many women and families also have to deal with the challenge of finding affordable childcare. Since 1990, childcare costs have increased over 214%, with the average annual cost for one infant exceeding $12,000.
Some major laws and policies that have been put in place to address sexism include the Equal Pay Act of 1963, which prohibits sex-based wage discrimination; the Pregnancy Discrimination Act of 1978, which makes it illegal to discriminate against pregnant women in the workplace; and the Civil Rights Act of 1964, which prohibits discrimination based on sex, race, religion, and national origin.
While these measures helped to eliminate some discriminatory practices, there are still many ways in which women are financially disadvantaged due to institutional policies and cultural beliefs.
Cultural Beliefs And Practices
Cultural beliefs and practices also play a role in perpetuating financial disparity between genders. In many cultures, women are seen as inferior to men, leading to discrimination in the workplace. Women are also commonly characterized as better at family care These stereotypes can limit women’s choices and opportunities and make it difficult for them to assert their rights.
These practices and ideas put a major strain on forward progress. For example:
- Women should care for children while men earn the household’s money: One of the most insidious cultural beliefs is that women should be primarily responsible for caregiving while men are the primary breadwinners. One way to challenge this is to advocate for more family-friendly policies. This sends the message that children are a responsibility that falls evenly on mothers and fathers.
- Women with children get paid less, while men with children get paid more – Because men were historically the ones bringing money into the household, they are paid more when they have children because now they are seen as being the multitasker who needs to make more to support their family. Paradoxically, a woman with children is perceived as a liability since they may have to take the necessary time off to care for their sick children, dentist appointments, parent-teacher conferences, etc. Women are paid less for being a parent, while men are seen as heroic for their “sacrifice” and will get paid more.
- Women should care for their aging parents because they are better caretakers – As we progress as a society, gender norms are also evolving. However, we are still in an age where women tend to be raised as caregivers, while men are taught to be providers. This is why women are the ones who primarily end up providing care for their elders. However, it is important to remember that caring for elderly parents is a responsibility shared by both sons and daughters.
Incorrect Negative Stereotypes About Women
Women have been fighting for equal opportunities for centuries, and though progress has been made, there is still a long way to go. One of the biggest obstacles to achieving true equality is the prevalence of negative stereotypes about women.
“Women are bad at math and investing”
One of the most persistent negative stereotypes is that women are inherently bad at math. Though there is no scientific basis for this claim, it still leads to women being passed over for financial opportunities in the workplace and in the financial services industry.
Women are also generally more risk-averse than men, which could lead to better returns in the long run. Fidelity’s 2021 Women and Investing Study has shown that female investors have outperformed male investors over the last ten years. Female investors spend more time researching their investments, have different risk profiles, and are more likely to hold their long term investments.
“Men are better at leadership and strategic thinking than women”
Another damaging stereotype is that women are somehow not as capable as men at understanding complex concepts or leadership. However, this could not be further from the truth. Despite institutional sexism and discrimination, women continue to make incredible strides in all fields of academia and leadership.
Studies also show that women are more effective than men at 13 out of 19 leadership competencies measured. Additionally, the idea that strategic thinking is trait more common in males is also starting to be debunked.
“Women are spenders and men are savers”
It is often assumed that women love shopping and tend to be bigger spenders than men. In reality, both men and women enjoy shopping, and spending habits vary widely between individuals regardless of gender. Would you be surprised to find out that men and women spend approximately the same amount on shoes, or that men outspent women in most categories measured in this study?
“Women are better at non-promotable tasks”
Time is money, but in our society, we don’t safeguard women’s time like we do men’s time. In the workplace, women are still expected to do the majority of non-promotable tasks – things like taking notes in meetings, sending out reminders, and organizing social events. Women disproportionately shoulder this unpaid emotional labor, and it takes away from the time they could be used to further their careers. As a result, women often end up stuck in low-paying jobs with less opportunity for upward mobility.
All of these untrue negative stereotypes about women lead to real-world consequences.
Are Financial Concepts Gender-Specific?
Anyone who has ever balanced a checkbook or managed a budget knows that establishing your financial goals and finding a way to achieve them is essential to a secure future. But are the underlying concepts of finance gender-specific?
Below are the basics of financial advice for everyone:
While the basics of financial management are the same for both men and women, some nuances must be considered. There can be a difference between what is financially best for men and women based on several factors, including expected income, expenses, retirement age, and length of life.
6 Reasons Women Need Different Financial Advice
It’s essential that women understand why personalized financial advice might be different for women vs men. Many factors that need to be considered are social, cultural, and economic. The main issues that women face are:
1. Wage Gap
Despite progress in recent years, the gender pay gap remains a persistent problem in the United States. According to the 2020 U.S statistics by Census Bureau, women were paid 82.7% of what men earned, amounting to a wage gap of $3.27 per hour. This gap is even more significant for women of color, with black women earning only 63 cents and Latinas earning only 54 cents for every dollar earned by white men.
The wage gap starts early in a woman’s career, and new research from Accenture sheds some light on how it affects young women in the workforce. The study found that younger women between the age of 25 – 34 earn 6% less than young men within five years of working. Meanwhile, men are 8% more likely to have attained manager level and 22% more likely to have attained senior management level by age 30.
Older women in the United States earn an average of 30% less than their male counterparts, a gender pay gap that only widens with age. While women have been making inroads into higher-paying industries in recent years, they are still over-represented in lower-paying industries.
2. Child Care
In many cases, women are forced to put their careers on hold in order to care for their children full-time. This can often lead to a decline in earnings and job security. Regardless of employment status, women are often tasked with the majority of childcare responsibilities, which can be both physically and emotionally demanding. As a result, many single and partnered women often find themselves struggling to juggle the demands of work and home life.
In September 2021, more than 300,000 women in the US left the workforce, while men gained 220,000 jobs. The data shows that mothers are shouldering a disproportionate burden when it comes to child care. This burden has far-reaching effects on women’s income and lifetime earnings.
3. Maternity Leave
Maternity leave is the period of time that a new mother takes off from work after the birth of her child. The average length of maternity as prescribed by the Family and Medical Leave Act (FMLA) is twelve (12) weeks, but oftentimes employers will offer less. In the United States, there is no federally mandated paid maternity leave.
This policy is in contrast to that of most other developed countries. According to the Organization for Economic Cooperation and Development, the US is one of only 41 countries that does not guarantee paid time off for new mothers. This can be a significant financial burden for families, as it can mean one less income during a time when expenses are already high.
Additionally, women who take maternity leave are often at a disadvantage when it comes to job security and advancement. They may be passed over for promotions or opportunities and may find it difficult to re-enter the workforce after an extended absence. As a result, maternity leave can have a significant impact on a woman’s career and, subsequently, her finances.
4. Elder Care
As parents live longer, the responsibility of caregiving is falling increasingly on women. A study conducted by the Pew Research Center found that seven percent of the women in the sample “assisted with parents’ personal needs,” compared to 3.6 percent of men.
In addition, 20 percent of women “helped parents with chores, errands, and transportation,” compared to 16 percent of men. The figures showed that women were more likely to respond that they had “stopped working or reduced their hours” in order to care for an aging parent. These findings suggest that women are shouldering a greater share of the burden when it comes to caring for aging parents. Spending more time caretaking leaves less time for work and networking activities, and can have adverse financial and career effects on women.
5. Financial Education
There is still a widespread belief that women are not as capable of understanding financial concepts as men. This belief is particularly prevalent in communities that practice more traditional gender roles and teach women to be caregivers and men to be providers.
A study found that “personal finance knowledge tends to be lower among women than among men.” This is likely due to the fact that women are simply less likely to be offered financial education than men.
Fortunately, this is starting to change. In recent years, there has been a push to close the financial education gender gap. This is a positive development, as it can help to empower women and give them the tools they need to make attain financial independence.
6. Women tend to live longer
According to the most recent statistics from the Centers for Disease Control and Prevention (CDC), women in the United States can expect to live an average of about five years longer than men. This discrepancy is attributed to a variety of factors, including genetics, lifestyle choices, and access to healthcare.
Because women live longer, they need to save more money for retirement. For example, if your retirement expenses are expected to be $20,000, then a woman who lives 5 years longer than her spouse would spend an additional $100,000. This also affects risk-profiles and investment plans since retirement ages are often the same for men and women but women may need to maintain and protect their assets for a longer period of time.
How to Level the Paying Field
Women-focused finance groups
Step one in closing the gender money gap is increasing financial literacy for women. This means educating women of all ages about personal finance, investing, and money management. There are a number of ways to do this, but a great place to start would be seeking out women-focused finance groups that provide support and resources to other women.
I highly recommend Women’s Personal Finance, a 50,000+ member facebook group and financial community specifically attuned to the specific financial needs and challenges of women and non-binary folx.
Groups like this provide support and advice on various topics such as budgeting, investing, and retirement savings. By joining one of these groups, women can take control of their finances and build their net worth.
Gender Parity in Relationships
In the book Fair Play, Eve Rodsky argues that the best way to level the playing field between men and women when it comes to financial opportunities is to establish “fair play” rules in relationships. According to Rodsky, fair play rules are those that promote equality and give both partners an equal say in decision-making.
Rodsky’s book has sparked a national conversation about how to promote equality in relationships. And it is clear that her ideas have resonated with many people. In a society where women still earn less than men and are often relegated to “support” and “administrative” roles in relationships, Rodsky’s call for fair play rules is a much-needed call for change. By promoting equality in relationships, we can start to level the playing field between men and women when it comes to financial opportunities.
Additionally, shared responsibility for finances is the best way to help ensure equality in the family. If couples take the time to discuss their finances openly, it can help to ensure that both partners are on equal footing when it comes to making financial decisions.
Paid Familial Leave
As mentioned above, the United States is the only developed country globally that doesn’t have a law guaranteeing paid maternity leave, let alone paid familial leave. Many women don’t want to wait to start their families until paid familial leave becomes written into law.
Therefore, to close the gender wealth gap, many financial advisors recommend that women plan ahead for time off work to care for a new baby whether that means saving up vacation days or taking out a short-term disability policy.
The idea is that by having some sort of income coming in while they’re on leave, women can avoid going into debt or falling behind on their bills- two things that can set them back financially for years to come.
Of course, this isn’t always possible for everyone. If you’re a woman who is self-employed or doesn’t have access to paid leave, you’ll have to be smart with your saving goals and budgeting to make sure you can still afford to take the time off you need.
Affordable Childcare
Childcare costs pack a punch, often with monthly costs as high as a mortgage payment. Many women decide to leave the workforce or scale back their hours to care for young children to reduce the amount of time their children spend in a daycare, and therefore the associated costs. This often has a major impact on their earnings throughout their careers.
While publicly funded child care centers or tax breaks or subsidies for businesses that provide childcare services to employees would also help, this could take a long time to become reality. In the meantime, it’s important for women (and their families) to plan ahead financially and career-wise for childcare.
Equal Pay
This gender-based pay gap exists across all industries and educational levels, and it negatively impacts people of color and mothers disproportionately. While there are numerous factors that contribute to this pay gap, including discrimination and the prevalence of women in lower-paying jobs, one of the most significant is the lack of financial opportunities available to women.
The Equal Pay Act of 1963 is a federal law that prohibits employers from paying men and women different wages for doing the comparable job. However, despite these legal protections, an average woman in the United States earns only 70-80% of what men make. What we need is a cultural shift that values women’s work as much as men’s and that starts with ensuring women have the same financial opportunities as men.
Equal responsibility for family care
Equal responsibility for family care (both elder and childcare) should be shared between men and women. This would free up women to pursue paid work outside the home and give men a more active and equal role in raising their children.
In addition, equal responsibility for family care would also help break down traditional gender roles that can limit both men’s and women’s career choices.
Final Thoughts
Just as the pervasive issue of financial illiteracy is beginning to be addressed through educational reform, so too must we face the long-standing problem of institutional sexism in order to level the financial “paying field” for women. Women have historically been at a disadvantage when it comes to financial literacy, and this issue must be addressed in order to achieve true equality.
In the meantime, it is also important to acknowledge the different challenges that women and men face. This way, women can get better financial advice that is tailored to the specific issues that can have large and long-term impacts on their finances.
Making financial education a priority regardless of gender is the first step in ensuring that everyone has the opportunity to build a brighter future. By increasing access to resources and opportunities, women are empowered to make choices that improve their lives and the lives of those around them. This is how we build a better world – one woman at a time.