Girls just want to have funds: how it’s not just the gender pay gap we need to talk about
The gender pay gap – the difference between what men and women are paid - is increasingly talked about around the world. If you want proof of the rising level of interest, just take a look at the Google trends for ‘gender pay gap’ as a search term since 2004.
You’ll see a more recent trend too – a spike in Google searches in April. One reason for this could be that here in the US we mark Equal Pay Day. This year it was 2 April (the date varies each year). It recognises how far into the new year women here must work to earn the same salary as men did the previous year.
Women had to work an additional 67 working days to achieve what men earned in 2018. If nothing changes, that means an American woman might need to work an additional seven years (over the course of a 40-year career) to achieve the same overall pay as her male counterparts.
In the UK, the biggest employers (250 staff or more) now have to share pay comparison data by law. The deadline was 4 April. Compared with last year’s results, 48% of companies had decreased the pay gap within their organisation (although the gap had increased in favour of men in 45% of companies, and stayed the same for the remaining 7% - great!).
The pace of change might be slow, however firms are increasingly tackling unconscious bias, offering more flexible working and encouraging shared parental leave. Steps ARE being taken to address the pay gap. But what about investing?
Time to recognise Equal Investing Day
The reason you might not have heard of this is because it doesn’t exist. As a woman planning for my future, I believe it should.
Along with the gender pay gap, disparities in investing behaviours between men and women contribute to the gender wealth gap.
Mind the gap
The gender investing gap creates additional financial hurdles for women. Women invest less money than men and this results in missed opportunities (although performance is never guaranteed) to benefit from compound interest.
Financial Feminist and businesswoman, Sallie Krawcheck, co-founder of Ellevest (a digital financial advisor for women) has estimated that this could cost women almost $1 million dollars over a 35-year career span. Britain’s gender investment gap tops £100billion, according to Holly Mackay, founder of financial website and researcher Boring Money.
So, what can we do as individuals? Four tips to help close the gap
While the gender investing and pay gaps are unlikely to disappear anytime soon, I believe we can slowly chip away at them by educating ourselves about personal finance. In honour of Equal Pay Day (and my Equal Investing Day), I have come up with this action plan to improve my personal finances and start to invest more. It may help you too.
1) Pay down debt
Women tend to have more debt than men and on average pay higher interest rates on credit card debt.
I’ve focused on paying down my debt and refinancing debt held at higher interest rates. By scrutinising the credit cards in my wallet, I’ve made sure that the ones I’m using have the lowest interest rates and/or offer rewards.
2) Start to build an emergency fund
An emergency fund means that you (hopefully) won’t be forced to divert money from investments or make major budgetary changes to pay for home or car repairs, say. It also makes you less at risk of getting into debt.
As a homeowner, I’ve learned that when it rains it pours. As soon as the patio was repaired, the garage door stopped opening, and then the washing machine started to leak. Having money set aside for these sorts of expenses has saved me a lot of stress.
3) Understand your retirement options
Women also fall behind men in contributions to their employer-sponsored pension plans.
Here in the US, one survey found that 57% of male millennial respondents contributed at least 6% to their retirement plans, compared to 46% of the females who participated. Lower contribution rates could lead to reduced retirement savings.
One of the most important things I did was familiarise myself with my employer-sponsored retirement plan and increase my pre-tax contributions.
Many employers will offer to match your contributions to pension plans. In the UK, this is even a requirement thanks to auto-enrolment.
This is essentially ‘free money’, so I make sure I take advantage of this as it adds additional savings on top of what I’m already contributing.
I’ve also elected to increase my contributions by just 1%. Although the increase did not really make much difference to my take-home pay, the extra contribution into my retirement account will (hopefully) increase my future savings.
4) Consider investing more
Over the course of a lifetime, allowing money to sit in savings rather than investing in markets can result in missed opportunities and compound interest (although performance is never guaranteed).
If you can afford to put away money for long periods and have an emergency fund, then you might want to consider investing. Although markets can be volatile, over the long term there’s a better chance that the ups and downs can be smoothed out.
Moreover, if you pay into a pension plan through your employer, your money is probably already invested in this way.