3 Alarming Ways Women Are Lagging Behind Men When It Comes to Their Finances
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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In today’s column, we chat with Christina Klenotic, senior vice president and head of brand and strategic partnerships at digital lending platform Laurel Road, about some of the alarming ways women are lagging behind men financially — and what can be done to even the playing field.
Women have been at a financial disadvantage for years — they are paid less, invest less and have more debt.
“Our data shows that women have faced more financial difficulties than men from outset, and then it’s exacerbated by student debt and the pay gap,” Klenotic said.
And the coronavirus pandemic has only made things worse.
“Women, in particular, have had a lot of added challenges during the pandemic that have impacted their finances — navigating childcare, changing work environments and just the mental stress of a truly unprecedented time,” Klenotic said. “Three-quarters of those surveyed agreed that women have been disproportionately impacted by the pandemic, with 85% of BIPOC women in agreement. Our survey also found that nearly half — 48% — of women say that their work situation has been negatively impacted during COVID-19.”
Millions of Americans lost their jobs during the pandemic, but women bore the brunt of these losses. Overall, women lost a net of 5.4 million jobs, which is about 1 million more than men. This was partly due to women leaving the workforce to take on child care duties with schools and day cares closed. A GOBankingRates analysis found that it could take women 18 to 24 more months than men to get back up to pre-pandemic employment.
The rise in unemployment among women, in particular, is just one way they are now at a financial disadvantage. Here are three more major areas where women are lagging behind men financially — plus, what they can do to catch up.
Women Are Less Likely Than Men To Ask For a Raise
According to the Laurel Road survey, roughly half (54%) of college-educated women say they will ask for a raise this year compared to three-quarters (75%) of college-educated men. If men continue to increase their pay while women lag behind, this will only lead to an increased widening of the gender pay gap. While this is disheartening, there is a silver lining — women are actually getting more confident to ask for a raise as the years progress.
“During the study last year, only 40% of college-educated women planned to ask for a raise,” Klenotic said.
The solution: Although women are getting better about asking for a raise, all women should feel confident enough to do so.
“If we can give one message to women, it’s know your worth and ask for it,” Klenotic said. “Women need to really know their worth. It’s an important piece of the puzzle in closing that pay gap and building wealth and investing in their future.”
Having frank discussions about compensation is the best way to ensure that you’re getting paid what you are worth.
“Do your research with a tribe of women, not necessarily in your company but in your industry, to get a sense of where you compare,” Klenotic said. “Press your own employer for pay transparency to understand the pay range for your role and responsibilities. Leverage industry resources to get a sense of what’s appropriate in a region, in a job category and in an industry.”
Women Are Less Confident Than Men When It Comes To Investing
The Laurel Road survey found that most women (92%) feel comfortable with short-term finances, such as managing their household finances, but less than three-quarters (73%) of women are confident in their ability to invest money smartly, compared to 87% of men. This lack of confidence translates into action (or lack thereof) — a recent study conducted by Wealthsimple found that women invest 40% less money than men do.
“This lag behind men in investing is based in confidence,” Klenotic said. “A theme we saw throughout our survey is that women have the know-how and the tools, but they need to feel confident in going after their goals.”
The solution: Klenotic believes that improving women’s financial literacy is the key to making them more active investors.
“The more that we encourage women to build their financial literacy and take control of their financial goals, the more power they feel in having conversations about money, which includes everything from asking for a raise to starting to make investments,” she said.
Women Have More Debt Than Men — And Don’t Have the Means To Pay It Off
“Women represent nearly two-thirds of total student debt in the United States, according to the American Association of University Women. The pay gap further exacerbates women holding onto debt because they aren’t able to pay off their debt as fast as men, leaving them disadvantaged as they work towards their personal and professional goals,” Klenotic said.
The survey found that women are more focused on paying down their student loan and credit card debt over the next five years than men were (19% vs. 11% and 33% vs. 27%, respectively), but due to their lower pay, this may take them longer to do.
The solution: Narrowing the gender pay gap is the best way to help women get out of debt and back on equal footing with their male counterparts. Yet half of women say their employer isn’t doing all it can to narrow the gender pay gap, according to the survey.
“This is especially true for BIPOC women — 58% of BIPOC women feel this way,” Klenotic said. “Women want their company to be more upfront about pay so they can determine themselves if there are issues, and nearly two-thirds of employed women — 65% — say their company isn’t completely transparent about pay policies for employees.”
Pay transparency is one of the ways employers can help narrow the gender pay gap. In addition “they can educate their workforce with financial literacy and they can professionally develop women with both mentorship and sponsorship,” Klenotic said.
So remember — how women can catch up in the areas they are lagging behind:
- Know your worth and ask for it.
- Educate yourself about investing and other financial topics.
- Ask your employer for pay transparency and professional development opportunities.
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