Saving money is one of the most important things you can do for financial stability. But there’s one big caveat for women: We are paid less than men and have fewer opportunities to save for retirement – and we tend to live longer.
The gender pay gap hasn’t narrowed much in the last 20 years. In 2002, women earned an average of 80% of what men earned, and in 2022, women earned 82% as much as men, according to the Pew Research Center.
Multiple factors contribute to women’s inability to save money, most of which are systemic and complex. In honor of Women’s History Month, let’s talk about the hurdles and disadvantages women face when it comes to saving, as well as the steps we can take to build a solid safety net and meet our money goals.
Why do women save less than men?
In 2022, women saved on average $3,146, while men saved an average of $7,007, according to the New York Life’s 2023 Wealth Watch survey. By the time women retire, we have 44% less saved than men, according to a Vanguard study. Men’s larger account balances are primarily based on higher wages, not due to greater participation levels in their retirement plans.
One of the biggest reasons women save less is the gender pay gap, but it’s not the only reason.
While the Equal Pay Act was passed in 1963, it wasn’t until the passage of the Equal Credit Opportunity Act in 1974 that women could actually own a credit card in their own name.
That’s important, because if women weren’t allowed to use a credit card without a husband until the mid-1970s, they weren’t participating equally in balancing cash flow, building credit and managing interest charges, according to Rita Soledad Fernández Paulino, personal finance coach and founder of Wealth Para Todos. “We have a whole generation of women whose mothers weren’t necessarily engaging in debt management,” said Soledad.
Those early patterns can affect households for generations. “I think there’s a lack of financial literacy from role models, people you feel like you can trust and relate to, who look like you,” she said.
Though women are more likely to graduate from college than men, a variety of other factors set women back financially, including parenthood, discrimination and gender social norms, according to the National Bureau of Economic Research. Here are several reasons why women are falling behind when it comes to saving.
1. Women earn less than men
The gender pay gap has narrowed over the last four decades, but a significant gap still exists between the earnings of women and men. White women earn an average of 83% as much as white men, and there’s an even wider gap for Black and Hispanic women: Black women earn 70% as much as white men and Hispanic women make 65% of the earnings of white men.
2. Women are more likely to be caregivers
Some 53 million US adults are caregivers, and 61% of them are women, according to the AARP. When women leave the workforce to prioritize caregiving, it can lead to lost wages and reduced retirement savings, Social Security and health care savings. For example, if you aren’t earning an income, you can’t contribute to individual retirement accounts (unless you open a spousal IRA).
On top of that, only 35% of employers offer paid parental leave in the US, forcing many women and their partners to make tough decisions to prioritize their family’s needs.
“It’s no secret that caregiving responsibilities, like raising children or caring for elderly family members, can lead to career interruptions,” said Bernadette Joy, a personal finance coach and CNET expert review board member. “Unfortunately, these interruptions may result in lower income and limited opportunities for career advancement.”
3. Women have more student loan debt
Women hold nearly two-thirds of the country’s $1.54 trillion student debt, according to the American Association of University Women. Because women tend to borrow more for their higher education than men, they accumulate more debt and struggle to pay it off with lower earnings.
4. Women are less likely to invest their cash
Generally, women are more likely to keep more of their savings in cash and feel less confident about their investment knowledge, according to Bankrate, CNET’s sister site. But research also suggests there are increasing opportunities for women to build financial confidence, according to Fidelity’s 2021 Women and Investing Study.
5. Women live longer than men
One reason women have insufficient retirement funds is that they live longer than men, which means their savings need to stretch further. In 2019, the average life expectancy for women was 81.4 years compared to 76.3 years for men, according to the National Center for Health Statistics.
“Women generally enjoy a longer life expectancy than men, which means planning for a more extended retirement period,” said Joy. “This longevity can pose financial challenges, especially regarding saving enough for retirement and healthcare expenses.”
6. Women receive less Social Security benefits
Women receive about 80% of the Social Security benefits that men receive, another disparity that stems from the gender pay gap. Social Security is calculated based on your 35 highest earning years, so if you earn less, you’ll receive less. Moreover, approximately 23% of employed women work only part-time, and those who take extended periods away from the workforce to be caregivers risk not having a full 35 years of earnings.
What can women do to build financial stability?
Many factors impacting how much women save for retirement are systemic, and there’s no single solution to improving our economic mobility.
So, how can women play catch up? Here are some steps you can take to improve your financial stability now and in the future.
Increase your financial literacy
“Start with improving your financial literacy,” said Soledad. And that means knowing your numbers. Take note of how much money you should have saved for an emergency fund and how much money you should stash in a sinking fund for upcoming expenses. If you have debt, know your loan or credit card interest rate and develop a payment plan so you know exactly how long it will take you to pay it off.
These figures are personal, so it’s up to you to know where you stand and develop a plan that accommodates your goals. If you need help figuring out where to begin, engage with personal finance experts online, sign up for a financial newsletter and listen to podcasts to improve your money IQ.
Reduce your financial risk by paying off debts
It feels like an age-old question: Is it smart to save while paying off debt? It doesn’t have to be all or nothing, but you need to find a balance that accommodates your finances. If high-interest debt affects your financial flexibility, it might be time to reevaluate your investment goals and tackle that first.
“I absolutely am a proponent of pausing investing until all credit card debt is paid off to help close the retirement gap,” said Joy. “Credit card interest rates over 20% are a real challenge for many women I coach.”
Have conversations with women in your community
It’s important to remove the shame and guilt from past money decisions so you can heal and move forward with retirement planning, Joy said. And one way you can work on healing your money trauma is by striking up conversations with other women in your community.
“I recommend that more women get involved in financial education communities with other women to not only address the monetary and educational gaps they face, but to get emotional support from other women going through a similar experience,” said Joy.
Strategize new ways to save money (that you haven’t already thought of)
Women face many hurdles when it comes to earning and saving money, and it’s worth making small strides now, even if the bulk of your budgeting involves dealing with this month’s bills.
For starters, because interest rates are so high, it’s a good time to be a saver. Put your extra cash into a high-yield savings account with a high annual percentage yield to benefit from compound interest returns, which can accelerate your savings growth. High-yield savings accounts are low-risk and easy to access, and the best accounts currently earn up to 5.35% APY.
Lastly, contribute to your company’s retirement plan to take advantage of your employer’s match. If you already do this, increase your contribution little by little (if you can). You could be missing out on free money if you aren’t maximizing your workplace retirement plan or taking advantage of the power of compound interest in a HYSA.
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