International Women’s Day: Breaking The Biases In Personal Finance

So many incredible women exist in the world, but many face intolerance, bias, and setbacks every day. International Women's Day is the perfect time to reflect on how far we've come in the last century and how much further we still have to go.

One of the most prominent inequalities women face is money — we save less overall and pay more for certain items and services.

What is International Women’s Day?

International Women's Day is a day to celebrate women's social, economic, cultural, and political achievements. It's also a day to raise awareness about the challenges women face and to call for change.

It got its start in 1911 in Austria, Denmark, Germany, and Switzerland. In 1975, the day became official when the United Nations recognized and started celebrating it on March 8th every year.

The Biggest Bias Against Women

The world is made for men — everything from cars to medicine was made with men in mind. Women face bias at work, when seeking health care, in banking and investing... and that’s just a small sample of the inequality.

While Pew Research shows most U.S. adults across demographic and partisan groups think progress has been made to give women equal rights with men, most believe the country hasn't done enough.

The biggest bias against women is in the area of finance. Women lag behind in financial literacy, retirement savings, investing, and wages — not just because of the gender pay gap, but also because women engage in more unpaid work (cooking, cleaning, childcare) compared to their male counterparts.

Financial planning is extremely important for every individual, irrespective of whether they are men or women.  When we talk about investing or financial planning as a whole, it should be a gender-agnostic concept. According to LXME’s Women and Money Power Report 2022, overall, 49 percent of women in the country are either not investing at all or are unaware of their investments. This speaks volumes about how little women are exposed to the world of investing.

Financial planning, money management, and investments have traditionally been male-dominated and male-oriented. Even with women excelling in all fields of life and becoming increasingly independent, their financial planning still takes a backseat. This roots in a lack of confidence in self to handle money.

Women have not been encouraged to actively manage money, as the ecosystem has primarily targeted men. The incumbent financial services ecosystem is largely male-dominated and hence focused on men.

There are various reasons why women shy away from gaining important life skills in money management. The deep-rooted orientation that “men manage money much better” has created a huge barrier in the minds of women that investing or financial planning is complicated and only a male brain can decipher it. Added to this are also years of conditioning that what matters is earning your money.

Traditionally, men have been the bread earners. Hence, matters of money have always been left to men, starting from saving to investing. Though this pattern is slowly changing due to the rising participation of women in the workforce, there is very little stress on how managing your money and investing is the only path to wealth creation.

Hence, women work hard at earning and saving their money, but usually, stop there. While the society around women is changing and making way for a more progressive work culture, women also need to adapt and start investing.

Women are born money managers. When armed with the right attributes of being risk-aware, disciplined, making informed decisions, and staying calm under stress, women can go from managing home budgets to smart investors.

Men and women undergo different life experiences, which differ in their knowledge and attitude toward risks. More than men, it is women that have a greater need to actively manage their finances.

Let’s take a look at five key reasons why financial planning is critical for women:

1. Financial Freedom

In order to be truly independent, every woman must aim to have financial freedom and become self-sufficient or capable of meeting her financial needs. For this, women need to start building their own wealth with a sound investment plan. As a rule of thumb, remember to start early to reap the benefits early.

Women are born money managers, they have the potential to bring societal changes as they begin to invest back into the community and their children.

2. Career breaks

According to research done by the insurance agency AIG Life, women are nearly three times more likely to have to take time off work to look after their children. As caregivers in the family, women tend to take more breaks from their careers than men. This could be due to childbirth, taking care of the elderly, or even relocating with their spouse.

This break would indicate a certain period without an income, which is bound to disrupt regular savings and investments. This makes it very important for them to plan their finances more carefully.

3. Lesser earnings

It is an unfortunate yet well-documented fact that for the same job, women are paid less than men. According to an online source, women earn 82 cents for every $1 man earns when comparing all women to all men. The pay gap increases even more with seniority.

Naturally, this means lower savings and a lower retirement corpus. There exist situations where women have chosen to take up a job that pays them less so that they have a better work-life balance. With lesser income, financial planning becomes very important for women.

4. Longer life expectancy

Women have a longer life expectancy than men. In India, the average male life expectancy is 68.4 years and the female life expectancy is 71.1 years.

This means that women live longer than men post-retirement and hence need a bigger corpus to survive. Sometimes, even working women tend to depend on their husbands to manage money.  In the case of their husband’s early demise, widows find it difficult to manage their finances. Effective financial planning thus becomes more important for women.

5. Life goals

The woman of today is more aspirational and driven. They have many professionals as well as personal life goals. It may range from traveling the world to starting their businesses.

All of these goals need to be backed by adequate finances, where investment planning helps. With the right financial plan, women can ensure that they meet their goals in the timeframe needed, without relying on others to back their dreams.

As mentioned earlier, financial planning is extremely important for every individual, irrespective of whether they are a man or a woman.  It is a bit more important for women to know their way around money and learn how to save, invest and spend it cautiously. Women must take charge of their financial well-being and excel in money management, just as they do in other fields.

How to Support Women’s Financial Equality

You can celebrate International Women’s Day in many ways. You might support women-owned businesses, give to a women’s charity, or reach out to the women in your life who have inspired you. But there’s more we can do to push for financial equality:

• Seek financial confidence. Before 1975, women couldn’t take out a mortgage without it being backed by a man. The Sex Discrimination Act offered women the chance to become homeowners on their own — an enormous step up for equality.
• Start growing your financial confidence by saving and investing and researching money advice. Now, single women make up 17% of all homebuyers, according to a 2020 National Association of Realtors report. Even so, a Yale study found that single women pay 2% more when buying a house and sell it for 2% less when compared to single men. The disparity is partly due to a lack of financial confidence and skill in talking about finances.
• Push for equal pay. A Pew Research Center study revealed women earned 84% of what men earned in 2020 — a figure that has remained steady over the past 15 years in the U.S. Why the 16% drop in pay because of gender? Differences in industries, jobs worked, years of experience, and the number of hours plays a role. For example, the U.S. Department of Labor reports that 58% of long-term caregivers are female. The unpaid obligations cause them to work fewer hours. But discrimination also exists, especially for women of color.
• You can push for equal pay by researching the earnings of others in a similar role through job advertisements and online salary comparison sites. Then, ask for a pay raise confidently.
• Find a financial mentor. Whether you’re looking for help with career trajectory or basic personal finance, a financial mentor can help. Pairing with another female can bring financial clarity and context when planning your spending, saving, and investing strategies.
• Create a list of people who are smart with their finances. Start with people you already know, but don’t be afraid to reach outside your social circle to ask for referrals. But be careful — you don’t want to fall in with someone who preys on the vulnerable.
• Fight for your retirement. According to the U.S. Department of Labor, women are more likely to work part-time, and many don't have access to employer-sponsored retirement plans. Employer-sponsored retirement plans are one of the best ways to save for retirement. Without access, women fall behind in how much they’re able to set aside for their golden years.
• Save in an IRA if you don’t have a plan through your employer. Also, front-loading your retirement contributions by saving more in your early 20s and 30s can help, too.
• Don’t fall for the pink tax. Products and services marketed to women cost more than those marketed to men. It's called the "pink tax" — and it's real, according to a study by New York City’s Department of Consumer Affairs.
• Never apologize for being ambitious. Society often puts negative labels on strong women. It happens at work, in groups, and even in some families. But never apologize for being ambitious. Judgment from others isn't about you. It's about them — usually, it's the fault of the other person's insecurities and narrow perspectives.
• Be confident about your passion, creativity, and determination. And be proud that you know how to ask for what you need.

Bonus Learning Materials:

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Sources:

Marguerita (Rita) Cheng, Mar 08, 2022; Priti Rathi Gupta, Mar 08, 2023; Abeer Ray, Mar 09, 2022;  Sujata de Souza, Mar 07, 2023