Five Issues Women Need to Consider When Managing Their Money

We’ve touched on this before. Personal finance can be different for women, due to a wide range of factors, which is why you may well need a specialist financial advisor. Here are just a few of the things women need to consider when planning their personal finance.

The Gender Pay Gap

There’s a lot of media buzz recently about how women are out performing men in education, and some women are indeed outearning some men, too. Don’t be fooled. Statistics show the gender pay gap is not only very real, but also that it widens over a lifetime in the workforce.

Data from Pew Research shows that while women aged 25 to 34 earned about 92% as much as men of the same ages, women between 35 and 54 earn 83% as much, and this drops to 79% among those ages 55 to 64.

What’s more, this pattern has held fairly constant over the last four decades, and remains the same regardless of educational background.

The Cost of Motherhood

It will come as no surprise to know that the aforementioned gender pay gap is not a result of employers blatantly ignoring equal pay legislation, and more about the differing impact parenthood has on the careers of women vs men.

Women are more likely to work part-time, flexible jobs, take time out of paid work (sometimes for years) to raise children and do other unpaid caregiving, and work the kinds of (lower-paid) jobs that fit better around their second shift as a full-time parent.

The New York Times has reported that the costs of motherhood are actually rising, and “catching women off guard” perhaps due to the false narrative – prevalent for many years now – that it is easy to juggle motherhood and career and simply ‘have it all’.

The surprise bills associated with motherhood start in the delivery room, and continue over a lifetime, while women’s earning capacity is often reduced far beyond what they expected and planned for. Which goes a long way to explain that slowly widening gender pay gap.

If you’re planning on remaining childfree for life this does not, of course, apply to you. But if you’re a woman who is even considering the possibility of parenthood at some point in your future, it’s worth bearing in mind.

Reduced Retirement Income

US government research shows that statistically women are poorly prepared for retirement, hold fewer retirement assets and are more likely to be impoverished at the end of their lives than men. In fact:

“Multiple studies indicate that women are disadvantaged across all sources [of retirement income]: they tend to receive lower Social Security benefits, have lower retirement account ownership rates and lower estimated retirement account balances, and own fewer assets than men.”

Again this is simply the result of lower earnings over a lifetime and the high cost of motherhood. Again, if you’re never planning to have children, it may not apply to you. If you are, retirement planning becomes a lot more important.

Divorce Hits Different

Divorce can be traumatic for everyone involved, but an in-depth study on the consequences of divorce and gender differences uncovered something significant. While men tend to more vulnerable to the short-term consequences of divorce when it comes to things like emotional and psychological well-being, it’s women who suffer financially.

As the report stated:

“The key domain in which large and persistent gender differences emerged were women’s disproportionate losses in household income and associated increases in their risk of poverty and single parenting.”

The message is perhaps: if you’re a woman going through divorce, you’ll be fine long-term, but your finances won’t. It might be a good idea to take specialist advice.

Different Priorities

One very interesting statistic is how much money women spend on their families, compared to men. Research from one global initiative concluded that:

“When women work, they invest 90 percent of their income back into their families, compared with 35 percent for men.”

This obviously leaves men with significantly more money to invest, and is no doubt a further piece of the puzzle when it comes to the disparity in retirement assets between genders. It seems feasible that this statistic alone, and certainly alongside the gender pay gap, is linked to more women being impoverished at retirement age and beyond.

Concerned about finances, now or in the future? It’s probably time to take a close look at work, income, investments and retirement issues, and potentially talk to a financial advisor who specializes in personal finance planning for women.

Karen Banes is a freelance writer specializing in entrepreneurship, parenting and lifestyle. She writes articles, website content, ebooks and the occasional award winning short story. Her work has appeared in a range of publications both online and off, including The Washington Post, Life Info Magazine, Transitions Abroad, Brave New Traveler, Natural Parenting Group, and Copia Magazine. Learn More About Karen