Unique Financial Issues Facing Women Today

By most measures, today’s women are far better off, professionally and personally, than they were a few decades ago. They are better educated, and they are growing in the ranks of management. Female college undergraduates now outnumber male undergraduates. Women hold more than half of management and professional positions, and 30% of all private businesses, accounting for nearly 8 million jobs, are owned by women. Not to mention the fact that women now control more than half ($14 trillion) of personal assets in the U.S.

Yet, despite the significant strides women have made, they are still bogged down by financial challenges and unresolved issues. The central issue forever has been the gender pay gap, which, although it is narrowing, still keeps women from realizing their true earning potential. When coupled with the fact that women live longer than men, it handicaps women’s ability to secure their financial future. That is just the tip of the iceberg of challenges women face in navigating their financial future.

What’s Behind the Gender Pay Gap?

According to the U.S. Census Bureau, women earn just 78 cents for every dollar a man earns. But it does not start out that way. At age 25, women earn 93 cents for every dollar a man earns. However, from there, the pay gap widens by 55 percentage points at age 45. Most of the pay gap occurs between ages 26 and 33.

The research shows that this is the time when women have children.

The pay gap for unmarried women without children is much smaller during this period. Regardless of whether a woman actually has a child and takes maternity leave, companies tend to structure their pay in anticipation of women needing more flexible hours. The higher pay is reserved for employees who can commit to longer work hours. When family members get sick, women are usually the primary caregiver, requiring time off or flexible hours. When the husband changes jobs, the woman typically quits her job when the family relocates. As a result, companies are less likely to give women employees more responsibility that could translate to higher pay.

It gets worse for women who leave the workforce for a period of time. According to a study by the Center for Talent Innovation, women lose 4% of their earning power after being out of the workforce for a few months. If they remain out for more than three years, their earning power may decrease by nearly 50%.

Regardless of how the gender pay gap manifests itself, the long-term consequences for women can be devastating. Earning less money means less savings and lower Social Security benefits, putting many women at risk of being unable to support themselves through retirement. According to a report by T. Rowe Price, women on their own save about half as much as men at retirement.

Financial Decision-Making

According to a Pew Research study, 90% of women will, at some point, be the sole financial decision-maker for their family. This is due to several factors, including a higher divorce rate and women living longer than men. Yet, more than 70% of women say they lack confidence in their financial decision making. In most married households, the husband makes the more important financial decisions around investments, or he is the one who has the relationship with the financial advisor. When the husband is out of the picture, women are often unprepared to make significant financial decisions.

Those big decisions include how to invest their money for the future. Having been left out of the loop on investment decisions, many women lack the confidence to make them independently. This despite the research that shows women are better than men when it comes to investing. That’s because women tend to be more rational and patient than men. They do more research, and when they decide on a strategy, they stick with it. Whereas men tend to try to beat the market by trading in out of stocks, women are content to let the markets work for them. When women become educated on the markets and sound investment principles, they can outperform men.