Why do women save less money than men? The answer may surprise you


Saving money is one of the most important things for financial stability. But there’s a big caveat for women: We get paid less than men and have fewer opportunities to save for retirement — and we live longer.

The gender pay gap has not decreased much in the last 20 years. According to the Pew Research Center, in 2002, women will earn on average 80% more than men, and in 2022, women will earn 82% more than men.

Many factors contribute to women’s inability to save money, most of which are systemic and complex. In honor of Women’s History Month, let’s talk about the barriers and disadvantages that women face when it comes to saving, as well as the steps we can take to build a solid safety net and achieve our money goals. Can be raised to complete.

Why do women save less than men?

According to New York Life’s 2023 Wealth Watch survey, women will save an average of $3,146 in 2022, while men will save an average of $7,007. According to a Vanguard study, by the time women retire, we have saved 44% less than men. Men’s larger account balances are driven primarily by higher salaries, not because of greater participation levels in their retirement plans.

The gender pay gap is the biggest reason women save less, but it’s not the only reason.

I think that role models, people you can trust and connect with, who look like you, are lacking in financial literacy.

Rita-Soledad Fernandez Paulino
Money Coach and Founder of Wealth Para Todos


While the Equal Pay Act was passed in 1963, it was not until the passage of the Equal Credit Opportunity Act in 1974 that women could actually have credit cards in their own names.

This is important, because if women were not allowed to use credit cards without a husband until the mid-1970s, they would personally have to balance cash flow, build credit, and pay interest charges, according to Rita Soledad Fernández Paulino. were not participating equally in the management. Finance coach and founder of Wealth Para Todos. “We have a whole generation of women whose mothers were not engaged in debt management,” Soledad said.

Those early patterns can affect households for generations. “I think that role models, people you can trust and connect with, who look like you, are lacking in financial literacy,” she said.

Although women are more likely than men to graduate from college, according to the National Bureau of Economic Research, many other factors hold women back economically, including parenthood, discrimination, and gendered social norms. Here are several reasons why women are lagging behind when it comes to savings.

1. Women earn less than men

The gender pay gap has narrowed over the past four decades, but a significant gap still exists between the earnings of women and men. White women earn on average 83% more than white men, and the gap is even larger for black and Hispanic women: Black women earn 70% more than white men and Hispanic women earn 65% of what white men earn. Are.

2. Women are more likely to be caregivers

According to AARP, approximately 53 million Americans are adult caregivers, and 61% of them are women. When women leave the workforce to prioritize caregiving, it can lead to lower wages and less retirement savings, Social Security, and health care savings. For example, if you’re not earning income, you can’t contribute to individual retirement accounts (unless you open a spousal IRA).

Additionally, only 35% of employers in the US offer paid parental leave, forcing many women and their partners to make tough decisions about how to prioritize their families’ needs.

“It’s no secret that caregiving responsibilities, such as raising children or caring for elderly family members, can create career disruptions,” said Bernadette Joy, personal finance coach and CNET Expert Reviews board member. “Unfortunately, these disruptions can result in reduced income and limited opportunities for career advancement.”

3. Women have more student loan debt

According to the American Association of University Women, women hold nearly two-thirds of the nation’s $1.54 trillion student loan debt. Because women borrow more than men for their higher education, they accumulate more debt and struggle to repay it with less earnings.

4. Women are less likely to invest cash

According to CNET’s sister site Bankrate, women generally keep more of their savings in cash and feel less confident about their investing knowledge. But according to Fidelity’s 2021 Women and Investing Study, research also shows that opportunities for women to build financial confidence are increasing.

5. Women live longer than men

One reason women have inadequate retirement funds is that they live longer than men, which means their savings need to increase further. According to the National Center for Health Statistics, the average life expectancy for women in 2019 was 81.4 years, while the average life expectancy for men was 76.3 years.

“Women generally enjoy longer life expectancies than men, which means planning for a more extended retirement period,” Joy said. “This longevity may pose financial challenges, especially with respect to saving enough for retirement and health care expenses.”

6. Women get less social security benefits

Women receive about 80% of the Social Security benefits that men receive, another disparity that stems from the gender pay gap. Social Security is calculated based on your 35 highest-earning years, so if you earn less, you’ll receive less. Furthermore, about 23% of employed women work only part-time, and those who take longer periods of time away from the workforce to provide care are at risk of not having a full 35 years of earnings.

What can women do to create financial stability?

Many of the factors affecting how much women save for retirement are systemic, and there is no single solution to improving our economic mobility.

So, how can women play catch-up? Here are some steps you can take to improve your financial stability now and in the future.

Increase your financial literacy

“Start with improving your financial literacy,” Soledad said. And that means knowing your numbers. Pay attention to how much money you should save for an emergency fund and how much money you should keep in a sinking fund for upcoming expenses. If you have debt, know the interest rate on your loan or credit card and develop a payment plan so you know how long it will take you to pay it off.

These figures are individual, so it’s up to you to understand where you stand and develop a plan that accommodates your goals. If you need help figuring out where to start, connect with personal finance experts online, sign up for a financial newsletter and listen to podcasts to improve your money IQ.

Reduce your financial risk by paying off debt

It seems like an age-old question: Is it smart to save while paying off debt? It doesn’t have to be all or nothing, but you need to find a balance that can accommodate your finances. If high-interest debt impacts your financial flexibility, it may be time to reevaluate your investment goals and tackle that first.

“I’m absolutely a proponent of holding off investing until all credit card debt is paid off to help bridge the retirement gap,” Joy said. “Credit card interest rates over 20% are a real challenge for many of the women I coach.”

It’s important to let go of the shame and guilt from past money decisions so you can heal and move forward with retirement planning, Joy said. And one way to heal your money trauma is to start conversations with other women in your community.

Joy said, “I recommend that more women join financial education communities with other women to not only overcome the monetary and educational shortcomings they face, but also to gain emotional support from other women going through the same experience. Support can also be obtained.”

Strategize new ways to save money (that you haven’t already thought about)

Women face many obstacles when it comes to earning and saving money, and it’s worth taking small steps now, even if the bulk of your budget is dealing with this month’s bills.

For starters, because interest rates are so high, it’s a great time to save. Put your extra cash into a high-yield savings account with a high annual percentage yield to benefit from compound interest returns, which can accelerate your savings growth. High-yield savings accounts are low-risk and easy to use, and the best accounts currently earn up to 5.35% APY.

Finally, contribute to your company’s retirement plan to take advantage of your employer’s matching benefits. If you already do, increase your contribution little by little (if you can). You could be missing out on free money if you’re not maxing out your workplace retirement plan or taking advantage of the power of compound interest in a HYSA.

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