Men are from Mars, women are from Venus. While this statement is most often used in the context of relationships, it seems to be the case with how both genders handle money as well.
A recent study by global investment firm BlackRock, who pooled 27,500 investors including 4000 Americans, found a significant savings gap between men and women in the United States.
On this episode, we take a look at the study’s findings and provide some tips and insights based on the data. Here are some of the study’s findings.
1. Only 53 percent of working-age American women have started saving for retirement compared to 65 percent of men.
2. Even those women who have saved for retirement have accumulated less than half of men’s average retirement savings: $34,900 for women versus $76,800 for men.
3. 45% of men are willing to take on higher risks to achieve greater returns, while only 28% of women are willing to take on higher risks. This lessens women’s potential for achieving greater returns, which may help them hit their retirement savings target faster.
4. Women prefer to save rather than invest: 68% of her portfolio is in cash or cash equivalents, such as money market funds, T-Bills, and certificates of deposit. Men only keep 59% of their portfolio in cash.
5. American women from age 55-64 have an average retirement savings of $81,300 compared to $118,400 for men.
When it comes to women and money
Women need to save more for retirement
The ironic thing is that women tend to live longer than men: the average life expectancy of women in the U.S. is 79 compared to 72 for men. This means that if they live longer but have little in retirement savings, they may outlive their money.
Women earn less than men
It is an uncontested truth that men earn more than women but over the years, that pay gap has been narrowing. According to the Census Bureau, for every dollar earn by men, full-time female employees make an average of 78 cents.
According to BlackRock, another factor could be the employment tenure of women due to pregnancy and child care, during which women don’t earn any money.
Women need to take on more risks
Men can be too aggressive when investing while women are too conservative. They need to up their game when it comes to taking risks and make money work harder for them. Instead of keeping most of their savings in cash, it may be better to put their money in aggressive funds like stocks, especially if they are younger. As they move towards 40s, that is the time to re-position themselves to less aggressive investments.
Women definitely need a budget
Women are generally more “spendy” and have more “needs” than men. For example, they accessorize more and are more pressured to spend on fashion/personal effects than men are. Most men can live on bare essentials and therefore have better chance of putting more money in their savings accounts.
Playing catch-up on retirement savings
Don’t be discouraged by the figures above. Instead, it should inspire you and give you some sense of urgency to save more for your retirement. It is better to be late than having saved nothing at all.
Probably the best way to go is to contribute as much, or even double the rate of savings in your 401(k). Growing your money requires either little money and more time, or more money and less time. If you’re a little bit late in saving for retirement, you need to put more money in order to cover the lost opportunity that you had years before.
If debt is getting in your way of maximizing your savings, you have to get rid of it as fast as you can. If you think it’s quite impossible in your situation, there are debt relief options to help you get back on your feet faster, so that you can focus more on your savings goal.
Learn from Millennials
Millennials are taking charge of their financial future
The good thing is that the study has found that Millennials nowadays are becoming smart savers, saving more than the baby boomers. These smart savers are saving an average of $112, 500, 5 times more than the median savings of American women ($21, 200).
Cash is not king anymore
When it comes to investing, Millennials consider themselves more active and involved in their investments. They also have a diversified portfolio, composed more of equities and less cash. This puts them in a better position to achieve better returns than those who keep their assets in cash.