Forbes dubbed 2023 the Year of Women, and it’s easy to see why. Women have had an unprecedented number of financial wins, and the future looks promising.
Data from McKinsey & Company says that by the year 2030, women will control $30 trillion of wealth (an amount nearly equal to the annual U.S. GDP), all while they still make 85 cents on the dollar (even less for women of color) compared to their male counterparts.
Despite the progress, only 19% of women, including high-earning women with no debt, feel confident in their ability to manage their financial affairs. What challenges do women face, and how do they overcome them to find their footing in the financial landscape?
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free 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.
Lack of financial literacy resources
Financial illiteracy is a growing problem in the United States, for women and men alike. Only 22 states require financial literacy to be taught in high schools. New York, which is, of course, home to New York City and Wall Street, the financial epicenter of the world, is not one of them.
At the collegiate level, studies have shown that men study economics twice as much as female students do.
Perhaps just as damaging to women is the fact that the issues women face tend to be wildly different from the issues men and even families face. Women are paid less, spend more time and money on childcare, require more healthcare (at greater costs), typically live longer than men and have less confidence in financial institutions as a whole.
Moreover, when they do have access to financial literacy programs, these factors often go unaddressed.
It's critical for women to prioritize saving as early as possible. Even small contributions to a retirement account like a 401(k) or an IRA can grow significantly over time thanks to compound interest.
For those just starting out, aim to save at least 10% to 15% of your income each year. If you’re further along in your career, consider increasing your contribution percentage to make up for lost time. Don’t underestimate the power of automatic contributions to help you stay on track.
It costs more to be a woman
The “pink tax” is the markup of sales tax that women pay for feminine hygiene products, but since the term originally hit the headlines in 1995 when California passed the Gender Tax Repeal Act, the term has expanded to include a host of gender-based price discrimination, all of which contributes to the lopsided financial burdens women carry.
For instance, women pay about $80 million a year on feminine products. Studies show that this amounts to a 13% higher financial burden for women just on personal care products.
School supplies, toys, clothing and even bicycles marketed to girls and women (especially if they happen to be pink) typically cost 7% more than products for boys and men.
The bottom line is, being a woman simply costs more throughout her lifetime, all while she is being paid less (remember: 85 cents to a man’s dollar).
How can we help balance the economic scales between what women spend, earn and their purchasing power?
Even with awareness rising, experts project that wage parity won’t be achieved for women until 2059 at the earliest.
Budgeting is key to ensuring that your money is working for you, not against you. To create a budget that accounts for additional expenses like the pink tax and higher healthcare costs, list all your monthly expenses and categorize them into needs, wants and savings.
Prioritize needs first, then allocate a portion to wants and, most important, to savings and investments. By tracking your spending regularly, you can identify areas where you may be overspending and adjust accordingly.
Women have longer retirements
Whether we’re talking about long-term care insurance, life insurance or health insurance, women tend to pay more in premiums and overall cost.
Two of the three chief factors that the insurance companies look at (in addition to health) are age and gender. Since women tend to live longer, that means an average difference of $5,265 per year for them compared with the average of $3,135 per year that men pay for the same long-term care insurance.
Women also typically have less saved for retirement than men do. We’ve already discussed how the pay gap affects women, but it extends far beyond what they actually make.
Women often have to take breaks from their careers, sometimes for years, in order to bring up children and provide care for them and aging relatives. It’s estimated that 81% of all caregivers are female.
The time away from work cuts into women’s earning potential and even limits their ability to find high-paying jobs later on. As a result, many women have little choice but to either not work or resign themselves to lower-paying jobs.
Today, women make up two-thirds of the workers who are paid the federal minimum wage.
Whatever else you do, plan for your healthcare expenses. Start by exploring health savings accounts (HSAs) or flexible spending accounts (FSAs) if they’re available through your employer.
HSAs, in particular, offer triple tax advantages — you contribute pre-tax dollars, grow your investments tax-free and withdraw tax-free for qualified medical expenses.
Even if you don’t have an HSA, setting aside a specific portion of your budget for future healthcare costs can be a proactive way to handle these inevitable expenses.
Don’t let inheritances slip through your fingers
Women are expected to inherit more wealth than men in the coming decades, thanks to increased life expectancy and shifting family dynamics.
However, this newfound wealth can disappear quickly if not managed properly. Before rushing into any big financial decisions, assess your goals and needs. Avoid the temptation to make large, impulsive purchases or investments.
Instead, create a plan that allows you to grow your inheritance responsibly. Diversify your investments and consider tax-efficient strategies, such as charitable giving or setting up a trust, to preserve your wealth for the long term.
The bottom line
Our financial systems and many of the societal structures we’ve become accustomed to are about to go through a massive paradigm shift. In many ways, women are at a financial disadvantage to men, but taking proactive steps like starting to save early, creating a budget that accounts for higher costs and planning for healthcare expenses can make a significant difference.
It’s these very strategies that hold the key to achieving greater financial parity. By encouraging women to talk about the specific challenges they face — the “motherhood penalty,” the wage gap, the pink tax and historical factors — and by equipping them with the tools to protect their wealth and avoid financial pitfalls, we can collectively change the narrative about women and money.
Already, we’ve made fantastic progress. Before 1974, it was illegal for a woman to get a credit card.
Today, 10.6% of Fortune 500 companies are led by women, a number that only 50% of people surveyed expect to grow year after year.
What’s more, women-led companies often outperform the others.
Education, awareness and actionable financial strategies are key to keeping this trend going. As the world continues to change and women gain more and more autonomy and empowerment, the financial landscape will change as well.
No longer will the “sheconomy” be an outlier or a financial fad. With more women learning about investing, taking control of their finances and protecting their assets, it will simply become good business.
Related Content
- Women Kick Men's Butts When It Comes to Investing
- Gender Pay Gap Is a Triple Whammy for Women: How to Beat It
- Women, What Is Your Net Worth?
- Tips to Help Single Women Struggling to Save for Retirement
- What Every Woman Needs to Know Before Retiring
-
Want To Retire at 55? See If You Can Answer These Five QuestionsWho said you can’t retire at 55? If you say yes to these questions, you may be on your way to an early retirement.
-
I'm 57 with $4.1 million and looking to retire abroad in a few years. I no longer see the point in contributing to my 401(k). Am I wrong?We ask financial experts for advice.
-
Want To Retire at 55? See If You Can Answer These Five Questions
Who said you can’t retire at 55? If you say yes to these questions, you may be on your way to an early retirement.
-
I'm 57 With $4.1 Million and Plan to Retire Abroad in a Few Years. Can I Stop Contributing to My 401(k)?
We ask financial experts for advice.
-
Potential Trouble for Retirees: A Wealth Adviser's Guide to the OBBB's Impact on RetirementWhile some provisions might help, others could push you into a higher tax bracket and raise your costs. Be strategic about Roth conversions, charitable donations, estate tax plans and health care expenditures.
-
One Small Step for Your Money, One Giant Leap for RetirementSaving enough for retirement can sound as daunting as walking on the moon. But what would your future look like if you took one small step toward it this year?
-
This Is What You Really Need to Know About Medicare, From a Financial ExpertHealth care costs are a significant retirement expense, and Medicare offers essential but complex coverage that requires careful planning. Here's how to navigate Medicare's various parts, enrollment periods and income-based costs.
-
The 'Me-First' Rule of Retirement SpendingFollow the 'Me-First" rule and you won't have to worry about running out of money when the stock market goes south.
-
How to Plan Your First International Trip After RetirementRetirement paves the way for a world of exciting (and intimidating) experiences. An overseas journey can be an ideal way to embrace this new phase of life.
-
My First $1 Million: Retired Magazine Editor, 70, Boise, IdahoEver wonder how someone who's made a million dollars or more did it? Kiplinger's My First $1 Million series uncovers the answers.
