USC Credit Union Blog

USC Credit Union Blog

Women and Finance: The Facts

Women’s Earning Power

This is an unprecedented time for women’s economic power. In the United States:

  • Women increasingly out-earn men – 28% of women in heterosexual marriages currently out-earn their husbands.
  • By 2028 the average American woman is expected to out-earn the average American man

However, couples with breadwinner wives tend to report lower relationship satisfaction and higher rates of divorce making getting “the money conversation” right even more important.

Despite this economic shift the gender pay gap still exists:

  • Full-time working women currently earn 77% of what their male counterparts earn. That means it takes women fifteen months to earn what men earn in twelve months.
  • A recent study by Wells Fargo shows that millennial women are not closing the gender pay gap – median annual household income for millennial men was found to be $77,000, compared with $56,000 for women. That’s a big difference on an annual basis, let alone over time.
  • This all means that women generally have lower lifetime income than men from which to build up their retirement nest eggs. It is estimated that, by age 65, women will have lost an average of $431,000 in lifetime earnings owing to the gender pay gap.

Per Sallie Krawcheck, the best investment a woman can make is to ask for a raise. For tips on negotiation – from asking for a salary raise to securing an equity share in a business, check out “Don’t Ask, Don’t Get – Tips on Negotiating For Yourself”.


Women’s Spending Power

In most households women identify themselves as the primary shoppers:

  • It is estimated that U.S. women’s total annual purchasing power is between $5 trillion and $15 trillion.
  • Women are believed to be behind 85% of all consumer purchases – from food, to cars, to electronics, to healthcare.
  • Women in the U.S are more likely to shop online than men – 12.5% of female Internet users made an online purchase in 2010, compared to 9.3% of men.

Despite the degree to which women drive spending, most women believe that marketers don’t understand them. Given only 3% of creative directors are female, this is hardly surprising!


Women, Wealth and Investing

Women are, increasingly, the creators and owners of wealth:

  • Women exercise decision-making influence over $11.2 trillion of investable assets which equates to 39% of total investable assets in the U.S.
  • It is estimated that by 2030, women will control two-thirds of the nation’s wealth.

But, millennial women do not seem to be focusing on building wealth at the same rate as millennial men:

  • Per Wells Fargo only 50% of millennial women have started saving for retirement versus 61% of millennial men. Subsequently, only 41% of millennial women feel satisfied with their savings level, compared with 58% of millennial men. Starting to save and invest early (even if in small amounts) is crucial owing to the powerful effect of compounding.

When it comes to finances, and specifically investing, women tend to demonstrate lower confidence than men:

  • Blackrock’s 2013 Investor Pulse survey of 4,000 Americans found that “48% of women describe themselves as knowledgeable about saving and investing vs. 57% of men.”
  • Women tend to take less investment risk than men which may mean that they lose out on returns that impact their retirement income. Specifically, Blackrock found that 55% of women globally (compared with 47% of men) agreed with the statement “I am not willing to take any risks with my money.”
  • Only 18 % of  millennial women (compared to 29% of millennial men) demonstrate high financial literacy. While this is a concerning statistic, this is one area where the gender gap appears to be closing as the percentage point difference between the genders for millennials is 11-points vs. 21-points for Gen Xers and 25-points for Boomers.

The financial industry must take some responsibility for closing the confidence gap:

  • Research by the Boston Consulting Group found that women (globally) are more dissatisfied with the financial services industry than with any other industry! 
  • As the industry is still mainly run by men, catering to men, women often feel as if their needs are not being met. “Married women are often considered mere appendages to their husbands. It should come as no surprise, then, that more than 70% of married women fire their financial professionals within one year of their husbands’ deaths.”

But, when women are engaged, educated and empowered women are just as good (if not better) at financial management than men:

  • When women invest confidentially they have the proclivity to be great investors owing to a lower likelihood of over-trading which means they incur lower fees. Read more on, “Why Women are Better Investors Than Men (and Why They’re Not)”.

When it comes to investment returns, women are as interested as men in strong returns but they also wish to align money with meaning:

  • Research by the Center For Talent Innovation found that “women look to wealth to provide a larger basket of goods, not just for themselves and their families, but also for society at large.” 88 percent of women surveyed expressed interest in investing in organizations which promote social well-being.

This represents an enormous, and exciting, opportunity for society as a whole.


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