Women's Financial Independence
Updated: Nov 22, 2022
For many of us, September is a time of both renewal and closing in. Children are back at school after the summer break, adults are returning to work after the summer vacations, and there is a renewed drive to get things done before the end of the year. At the same time, in the northern hemisphere, the night’s drawing in, days turn colder and wetter, and we start to settle in for the winter ahead. It seems fitting then – in the spirit of both renewal and closing in – that the UN Equal Pay Day is held on September 18th. Although several countries have observed such days for some years, the UN only instated this day in 2020. Intended to draw attention to the gender pay gap, Equal Pay Day helps pace ourselves for the long battle ahead and renew efforts to fight the gender pay and wealth gap.
Wage Gap for Women
Around the world, women are paid less for the work they do than men. Women are generally paid 20 to 30% less than men for the same job in a similar position. In the United States, women earn, on average, 83 cents for every dollar paid to a man. This gap grows for black, Latina and native American women, as well as for women who are mothers. On top of this, women perform the majority of household and care work, resulting in many more hours worked for no pay at all. This gap has been exacerbated by the Covid-19 pandemic and the major inflation we currently face, which is why it is crucial to renew our efforts and prepare for the marathon in front of us to close this gap.
Unfortunately for us, it doesn’t end there. Any wage gap that exists increases with age, as it accumulates over time. Wealth begets wealth, right? Therefore, most bonuses and pay rises we receive will be based on our respective starting points, while women also lose out on income and pension contributions when they take maternity leave, and are more likely to stay at home or work part time after having children (in heterosexual relationships). It is thought that the financial implications of having children may be a factor that holds women back from investing; the added career uncertainty that comes with having children and the direct costs may increase our need to have cash on hand – rather than having money tied up in investments that we can ill afford to lose.
Women are more likely to hold cash savings, while men are more likely to invest. A recent survey in the United States found that 48% of women and 66% of men say they actively invest, with women more likely to delegate management of their portfolio to someone else. This is an important factor in the gender wealth gap and an element of women’s financial independence and empowerment that needs to solved to improve women’s life choices and wellbeing.
A 2021 report found that ‘financial independence’ is rated as the biggest contributor to overall well being. Yet a recent survey in the UK found that only 45% of women feel financially independent, while 48% of respondents reported that the high cost of living is the biggest barrier to improving their situation. As we enter a cost-of-living crisis, with rising inflation and stagnant wages, women risk being disproportionately affected. The wealth gap means that women are less likely to have a financial buffer and their lower wages mean they will be less able to absorb additional costs. Meanwhile, the cost of living is likely to quickly outpace the returns on savings, due to low interest rates on savings accounts.
If women continue to save, rather than invest, this will exacerbate the pay and wealth gap between men and women, especially in a financial climate such as the one we’re currently living through. Financial independence gives us all options and opportunities and women need to be better prepared and supported to invest their growing wealth smartly. We’re at a critical point in time, where women are earning more than ever before but if we don’t figure out how to invest and plan for our futures, many of us will live in poverty in old age or find ourselves trapped in relationships we no longer want to be in.
Women as Investors
Women are increasingly recognizing this problem and innovating ways to address it – either as investors themselves, as angel investors, as entrepreneurs and as venture capitalists – all finding new and different ways to support women. So while we still have problems to solve, in the coming years we will see more women as investors, venture capitalists and entrepreneurs all supporting each other and opening doors for women to become financially empowered.