Conquer your student debt. Refinance now.
What’s that saying? Investment risk is from Mars, caution is from Venus? According to new data from Earnest, men and women average similar levels of debt and cash savings, but men have nearly twice the net worth due in part to their willingness to put money into the market.
Men’s average net worth roughs out at about $12,188, while women’s is $5,541. Men and women both maintain similar levels of cash (around $9,500) and debt ($23,511 for women, $24,095 for men). Their student and personal loan balances are similar, too, although men have higher credit card debt.
But when it comes to investment account balances, the average woman has parked 26% less than her male counterpart–$19,541 versus $26,717. This gap may seem small at present, but in 30 years time (at 5% interest and with no further investments) men would have nearly $120,000 and women only $87,563—a $32,000 difference at retirement.
Wealth Gap for Women
It’s well known that women face a handful of gender-specific headwinds as they tack into the future. Here’s the breakdown:
- They typically earn less than their male peers (and thus have less to set aside). This gap widens the higher they climb up the ladder, according to our Earnest data.
- They’re more likely than their male counterparts to pause careers to care for children or elders (which may lower their lifetime earnings and, thus, investments).
- They typically live longer than men (meaning what they do save has to stretch further). Don’t believe us? Try the Social Security life expectancy calculator.
Put it all together, and the deck seems stacked against women.
But it’s time to change. Women in their 20s and 30s, if they shift their approaches to managing debt, savings, and investing, have plenty of time to weight the scales of wealth.
In a previous blog post, Earnest talked to Sallie Krawcheck, co-founder and CEO of Ellevest and a former high-ranking Wall Street banking executive, about her financial recommendations for women.
Krawcheck’s advice crosses gender lines—amassing money is amassing money.
Women don’t necessarily need a personal touch or different customer service experience to boost their investment accounts. They do need to negotiate higher wages, stay closer to the workforce, and favor investment risk over more conservative financial gestures.
Her advice to women boils down to this: Invest early, often, and regularly to leverage compounding interest. Reduce highest-interest debt first. And prioritize these efforts over piling up low-interest emergency savings, which neither grows with the market nor wipes out the drag on investment that debt causes.
Look at Earnest’s data on how men and women are handling their money, and Krawcheck’s advice more or less suggests that women behave a little more like the guys. Men have prioritized investing over paying down discretionary debt—while managing to parallel women with respect to savings. In the long run, based on our data, they’re the ones who may come out ahead with regard to financial outcomes.
Conquer your student debt. Refinance now.
Even Homebuying Might Not Close the Gap
Another interesting difference between men and women and their personal finances: For more than 15 years, single women have bought homes at more than twice the rate of their single male counterparts. In 2017, single women accounted for 17% of all home buyers, versus only 7% of single men.
Even still, some research indicates that men tend to “do better” on their homes appreciation-wise in part because men can on average spend more on a home, meaning women’s curbed buying power also curbs returns.
Rethinking the Pursuit of Higher Salaries
The lack of pay parity between the sexes is not just a social inequity, but a real contributor to women’s financial disadvantage and even poverty at retirement age. Krawcheck advises women to think harder about negotiating salaries, changing jobs to increase paychecks, and proactively working to bolster and increase income.
The nonprofit Women’s Institute for a Secure Retirement (WISER) recently notes that the median income of older women was about $17,375, while older men were able to draw more than 50% more—or $31,170. Because some retirement benefits (like Social Security) are built off prior earnings when women make earning take a back seat they’re doing the same with their retirement.
For women in their 20s and 30s, all these facts and statistics ought to raise a red flag about career approaches and choices—or at least prompt conversations with bosses, partners, and anyone else making a direct impact on her financial future.
The good news is that it’s already happening. According to an Earnest survey earlier this year, millennial women are more likely than men to say they have met financial milestones like financial independence. Let’s not stop there, however. Women at all life stages can change their approach to maximize financial security.
It might start by saying yes to risk.