“Working women” is a concept that much of our American society still struggles to accept.
This can be best showcased by the current pay gap between men and women. According to women’s advocacy group AAUW, women earn 16% less than men on average. Female employees earn 84 cents for every $1 a male counterpart earns. Considerably the most shocking statistic from the report is that a 20-year-old woman just starting full-time employment is estimated to lose $407,760 over a 40-year career compared to a man. With the odds already stacked against us, it’s imperative that we truly understand how to maximize our earnings. We cannot afford not to.
Before determining how to optimize our earnings, it’s important to understand how we got here. Historically speaking, women weren’t allowed to take control of their finances. Women couldn’t open their own bank accounts until the 1960s, and they weren’t able to get a credit card until 1974. This lack of financial empowerment has led to financial illiteracy while contributing to the gender pay gap and other inequalities in the workforce.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Family dynamics and strict gender roles have also contributed to the financial challenges women face. Having children, keeping the home in order or caring for loved ones can all negatively impact a woman’s career — especially if it forces her to take time away from work. A report from AARP found 61% of women are more likely to assume caregiving responsibilities compared to 39% of men. As for pay, a report from the National Women’s Law Center found full-time working mothers are typically paid 75 cents for every dollar paid to fathers. Although women have made strides to change this narrative, some of those systemic ideals still stand today.
Considering these statistics, women must make conscious efforts to reach financial security and independence. This starts with debunking some common financial myths.
I’m too young to start saving for retirement
When you’re starting your career, planning for retirement is probably one of the last things on your mind. Although it may be decades away, it’s never too early to start investing for retirement because of time and compound interest.
Compound interest is when you earn interest on the initial principal and the interest you’ve accumulated along the way. Essentially, your interest is earning interest, so the sooner you start saving, the better.
A great way to start saving for retirement is to open an IRA or take advantage of your employer-sponsored 401(k). If your employer matches your contributions, you’ll want to contribute that amount to maximize your savings. Consider it free money to you from your employer.
I don’t make enough money to invest
Anyone can, and should, invest their earnings. Some people choose to invest in the stock market, which can bring a high rate of return. Others may choose to invest in real estate or a high-yield savings account. Each one of these options has a level of risk associated with them.
Meeting with a financial expert can help you find the right investments based on your financial situation and help you evaluate how much risk you’re willing to take.
Keep your checking and savings accounts with the same bank
While it may be convenient, keeping all of your money in one bank could cause you to miss out on other opportunities. The terms vary for each bank. Some may offer higher compounding, and others could require you to keep a certain amount in the account at all times to keep it active. Do your research before opening a new savings account.
Debt is bad
Accumulating some debt can actually benefit you. Some credit cards offer cash back and other rewards programs when using them to make purchases. The key is to not let it get out of hand. If you have a credit card, be sure to pay it off in full at the end of each month to avoid paying interest. This will also allow you to build credit, which can help you in the long run.
A good credit score can lead to better interest rates on mortgages, car loans, etc. Debt becomes bad when you can’t afford to pay it off, so don’t charge more than you can afford.
Once you have a basic understanding of personal finance, you can begin to apply these concepts to your life. Creating a budget — and sticking to it — can help you figure out how your money is being spent and where you can cut costs. The extra funds can then be used to pay down debt or contribute to savings.
If you have multiple loans, you might want to consider consolidating them. Making one payment instead of five can help ensure you never miss a payment, and it could even lower your interest rate.
In addition to loan consolidation, taking advantage of autopay methods can also increase your financial discipline. This ensures your bills are paid on time because the money is automatically withdrawn from your account each cycle.
Setting goals for different phases of your life can also help you become more financially prepared. List your financial objectives and a deadline to complete them. This will empower you to save and spend with intention.
You can also take this opportunity to financially plot out a plan for major life events such as buying a home or starting a family.
And if you haven’t, I’d encourage you to set up emergency savings to cover unexpected costs. A general rule of thumb is to have three to six months' worth of living expenses saved.
Personal finance can be complex and comes with unique challenges — especially for women. Talking with a financial adviser can help you navigate these challenges, allowing you to be in the driver’s seat of your finances.
Related content
-
How Another Trump Presidency Will Impact the Stock Market in 2025President Trump will have little direct impact on the stock market, but his policies, initiatives and posts certainly can make prices move. Here's how.
-
Stock Market Today: Stocks Are Mixed Ahead of CPICool wholesale inflation numbers provide only slight relief before Wednesday's release of December Consumer Price Index data.
-
Irrevocable Trusts: So Many Options to Lower Taxes and Protect AssetsIrrevocable trusts offer nearly endless possibilities for high-net-worth individuals to reduce their estate taxes and protect their assets.
-
How to Organize Your Financial Life (and Paperwork)To simplify the future for yourself and your heirs, put a financial contingency plan in place. The peace of mind you'll get is well worth the effort.
-
Financial Confidence? It's Just Good Planning, Boomers SayBaby Boomers may have hit the jackpot money-wise, but many attribute their wealth to financial planning and professional advice rather than good timing.
-
Will You Be Able to Afford Your Dream Retirement?You might need to save more than you think you do. Here are some expenses that might be larger than you expect, along with ways to ensure you save enough.
-
Three Steps to Simplify Paying Your Taxes in RetirementOnce you retire, how you pay some of your taxes can change. Here's how to get a handle on them so you don't run afoul of the IRS and face penalties.
-
More SECURE 2.0 Retirement Enhancements Kick in This YearSaving for retirement gets a boost with these SECURE 2.0 Act provisions that are starting in 2025.
-
Saving for Your Emergency Fund: As Easy as 1-3-6An emergency fund that can cover six months' worth of expenses is far easier to build if you focus on smaller goals at first.
-
The Wrong Money Question to Ask After Trump's ElectionIf you're wondering what moves to make with a new president moving into the White House, you're being dangerously shortsighted. Here's what to do instead.
