The Other Gender Gap That’s Costing Women Money (And How to Close It)
You’ve heard about the gender pay gap—you know, that lovely statistic that women earn 78 cents for every dollar that a man makes? It’s frustrating to work just as hard, if not harder, than someone else, only to earn less than they do. But there’s also something women aren’t doing, and it’s holding them back from reaching their financial goals.
That something is investing. And this “gender investing gap” is something women need to overcome.
Now, it’s easy to feel like investing is just another jargony, stuffy old boys’ club with bad suits. But the truth of the matter is that in the investing world, it’s actually women who have proven to be more powerful. They just have to get over one big obstacle: Starting.
A Missed Opportunity
See, the biggest investing mistake that women make isn’t over-trading, panicking during market downturns, being overconfident, or any of the other mistakes that tend to trip up investors. Rather, their main problem is simply not investing at all. Of all the assets controlled by women, a whopping 71 percent of that is just sitting there in cash (by comparison, men keep about 60 percent of their assets in cash). Not only is that money missing out on the potential return from market gains, but it’s effectively shrinking in value as a result of inflation.
You may be killing it at your job, but just making money isn’t enough—you also need to make your money work for you, and that can’t happen if you’re not invested in the market.
Here’s a bit of perspective: If you make $85,000, save 20 percent, but then put your savings in a basic savings account instead of in the market, you may lose out on $1.1 million or more over the next 40 years.1 Here’s a more short-term way of thinking about it: if you make $85K a year, put 20 percent in the bank, and wait 10 years to invest, you could be losing about $100 every single day.2 Your money’s having a serious case of FOMO right now, and it’s time you do something about it.
The good news about the gender investing gap is that we may be able to close it. Investing helps you work towards the things that matter most to you, whether that’s the trip of a lifetime or retiring at 50. At Ellevest, we’ve done hundreds of hours of research to understand what women’s financial goals really look like, and create plans that best suit those goals. And investing is usually a key component of those plans.
Mention, investing, though, and many people have the same reaction: How could something risky like investing in the stock market help someone work to achieve a stable financial future? It turns out that we have a habit of overestimating the riskiness of investing, which stops us from taking the necessary step of investing at all. It’s a shame, really, because studies show that women are actually better investors than men—so the last thing you want to do is leave it to the boys to handle (no matter how much he gloats about his amazing returns).
You must be your own boss.
 Source: Mind the Gap–An Ellevest Publication, Disclosure 4.2
 Source: Mind the Gap–An Ellevest Publication, Disclosure 4.3
The one question I hear the most is, “Well, where do I start?” Follow these 9 steps to start closing the gender investing gap for good:
- Pay down that credit card debt. This is a tough but totally necessary first step — even in a bull market, your returns in the stock market are unlikely to outpace the interest rate on a typical credit card account, so it makes financial sense to put your money there first.
- Have other debt, like student loans? Pay it down or refinance it if it’s got a double-digit interest rate.
- Get that emergency fund set up. You can do it in your own checking account, but a separate savings account is also a great idea. Put three to six months of your take-home pay in here. That way, you’ll never have to dip into your dream vacation savings just to fix your car.
- Pay yourself! A good rule of thumb to follow when dividing your paycheck is this: 50 percent for needs / 30 percent for wants / 20 percent for investing. Now you’ll have to make it a priority to invest. See what I did there?
- Get that 401(k) match if your employer offers it. Not signing up for a match is like saying no to free money. No one wants to say no to free money.
- Have a match? Now it’s time to get an IRA. There are quite a few IRA options out there, so take time to find the best one for you.
- Check out an outside brokerage account. You should only consider this if you’ve maxed out your retirement accounts, though.
- Once you’ve done this, it’s time to think about how to invest your money. You’ve heard about stocks and bonds, sure, but don’t drop all of your money into one pot. Just like diversity is a beautiful thing at the workplace, it’s also a beautiful thing in a portfolio (which is why Ellevest provides a broad range of personalized, low-cost ETFs).
- Keep being a boss. Don’t sell yourself short at the workplace, in your relationships, and as the manager of your money. You know what you want, so go get it.
Remember: you don’t need to know everything about investing to have a smart financial planning strategy. I meet so many women who think they need to take a night class or read a 500-page book before they even start to invest. The truth is, we could all use more financial education, but guys tend to go ahead and invest anyway, while women put it off until they feel like they’ve mastered it completely. But it’s not as complex as we make it out to be. There are even options to invest in other women.
Just as we’re starting to ask for promotions and demand that raise, so too do we need to make investing a priority, too. “Future You” will thank you for it, and probably pour you a mai tai to celebrate.
Sallie Krawcheck is the CEO and Co-Founder of Ellevest, a venture-capital-funded digital investment platform for women. She is the Chair of the Ellevate Network and the Pax Ellevate Global Women’s Index Fund, as well as the best-selling author of Own It: The Power of Women at Work.
The statements contained herein are the opinions of Ellevest. All opinions and views constitute our judgments as of the date of writing and are subject to change at any time without notice.
The projections of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results. Information was obtained from third party sources, which we believe to be reliable but not guaranteed for accuracy or completeness. The information provided should not be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice.
The information provided does not take into account the specific objectives, financial situation or particular needs of any specific person. Diversification does not ensure a profit or protect against a loss in a declining market. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income. Investing entails risk including the possible loss of principal and there is no assurance that the investment will provide positive performance over any period of time.