An alarming number of women have little to no money in their bank accounts, a recent GOBankingRates survey found. Thirty-seven percent of women have $100 or less in their savings account versus just 28% of men. In addition, women are more likely to report having less in their checking accounts, with 42% saying they let their minimum checking account balance reach $100 or less; meanwhile, only 31% of men report having such a low minimum balance. In today’s “Financially Savvy Female” column, we’re chatting with Jane Voorhees, CFP, director of financial planning at ALINE Wealth, about why women have less money in their bank accounts than men, how much women should ideally have in their bank accounts and the steps they can take to get there.
Why do women tend to have less in their bank accounts than men?
On average, women earn less than men. So, for them to save an equal amount, they need to save a greater percentage of their paycheck than men. Their living expenses are generally no different than their male counterparts, so they don’t have as much available to save after paying the bills. On top of that, women often leave the workplace or work part-time due to child-rearing or elder care. Full-time daycare can be very expensive, and it can seem like it’s not “worth it” to go to work and pay for childcare. You can’t save money if you don’t make money!
Although things are changing, traditionally women were less likely to involve themselves proactively in finance and investments. Finance has always been a male-dominated arena, so it can feel intimidating to have money conversations. Moreover, men still tend to be the financial money managers in the household.
How much should women aim to have in their savings and checking accounts?
Ideally, everyone should aim to have an emergency fund to keep in a high-yield savings account separate from their day-to-day checking account that would allow them to pay three to six months of living expenses. You never know what might be down the road, as we all know too well having lived through the last two years! Knowing you have enough to pay your bills if your income is reduced or gone can be a huge stress reliever in uncertain times.
Your checking account should have enough to cover your monthly bills with enough buffer so you don’t accidentally incur any overdraft fees.
What steps can women take to ensure they have enough money in their bank accounts?
1. Track your spending and look for ways to cut back. The first thing to do is to look at your spending and make a list of the bills you absolutely have to pay every month: rent, mortgage, utilities, car, insurance, phone, etc. Then make a list of everything else you have been spending money on. Look to see where you can cut down or eliminate spending.
2. Make a budget and stick to it. Prioritize personal savings as part of your budget.
3. Automate your savings. Open a bank account away from your checking and debit card. Have a portion of your paycheck direct deposited into that account.
4. Cut down on impulse purchases. Pause before you spend money on nonessentials and ask yourself: “Do I really want to spend this money?,” “Does this put me over my budget?,” “In the long run, would I be happier had I saved it?” I do a lot of shopping on Amazon and I often move my items to “Save for Later” instead of just checking out. Then I can come back in a day or week and see if I still want to purchase the items. I often wind up deleting items.
For some people, it works better to use cash rather than debit or credit cards. Take a certain amount of cash each week to spend. Think of it as your allowance. If you’ve already spent half your allowance, you might think twice about running into Starbucks for an expensive latte!
5. Do not rack up credit card debt. If you charge something, make sure you can pay it off in full when the bill comes in. Not only will you not be racking up debt, but you also won’t be paying interest on it. Think of a credit card more like a debit card, and it won’t become a problem for you down the road.
6. Increase your savings whenever you can. If you get a raise, increase the amount you direct deposit into your savings account. If you come into extra cash, throw it in your savings rather than splurging on something you don’t really need. Watching your bundle of savings grow can be an incentive in and of itself to save even more and achieve bigger financial goals.
GOBankingRates wants to empower women to take control of their finances. According to the latest stats, women hold $72 billion in private wealth — but fewer women than men consider themselves to be in “good” or “excellent” financial shape. Women are less likely to be investing and are more likely to have debt, and women are still being paid less than men overall. Our “Financially Savvy Female” column will explore the reasons behind these inequities and provide solutions to change them. We believe financial equality begins with financial literacy, so we’re providing tools and tips for women, by women to take control of their money and help them live a richer life.
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Methodology: GOBankingRates surveyed 1,000 Americans ages 18 and older from across the country between Dec. 7 and Dec.12, 2022, asking 19 different questions: (1) What category does your current financial institution fall under?; (2) Have you considered changing banks within the past year?; (3) If you have considered changing banks in the past year, were any of the following factors? (Select all that apply); (4) Which feature, perk or other offering is most important to you when opening an account with a new institution?; (5) Are you currently satisfied with all the banking products and services offered by your bank/credit union?; (6) Would you ever have different types of accounts across multiple banks? (i.e. checking at Chase, but savings at TD Bank); (7) What is your most preferred method of banking?; (8) Which of the following is the biggest factor for you staying with your current bank?; (9) Which of the following bank accounts do you currently use/have open? (Select all that apply); (10) How much is the minimum balance you keep in your checking account?; (11) How much do you currently have in your savings zccount?; (12) What amount of a sign-up bonus would make you consider switching banks?; (13) Have you considered using any app-only banking platforms (aka neobanks) in the past year (e.g. Current, Upgrade, Chime, Dave, etc.); (14) How important is it to you for your bank to be affiliated with a crypto exchange/platform?; (15) In the past year, how often have you written a physical check?; (16) When was the last time you visited your bank in person?; (17) Why would you choose to visit your bank in person? (Select all that apply); (18) When you think about banking, do you think of it as something you need or don’t need?; and (19) What services/products do you expect from your bank and/or credit union? (Select all that apply). GOBankingRates used PureSpectrum’s survey platform to conduct the poll.