You might have heard of the gender pay gap before. Studies have shown that “While women earn about 79 cents on the dollar compared to men, they own only 32 cents; and women of color own only pennies on the dollar compared to white men and white women.”
In this one statistic it’s clear that, while the pay gap of 21 cents is important, the wealth gap of 68 cents is extremely serious. After all, while your pay reflects what you take home on your paycheck, your wealth reflects what you have and keep. The gender wealth gap is a serious issue, and only serious action will close it. But what exactly is it, and what can you do to help solve this major problem?
Why Is There a Gender Wealth Gap?
The gender wealth gap is the difference between how much wealth men own and how much wealth women own. The gender wealth gap has existed throughout history – but why is it still around? Several key reasons have made it difficult for women to keep as much wealth as men.
First, women don’t invest as much as men do. Typically, women keep their money in the bank while men invest theirs. Investing can lead to high returns, which equals more wealth, especially over time.
Second, women don’t get paid as much as men. This happens because women are denied promotions, are rejected for raises, and stop getting raises before men do. Usually, the reasons that women are denied raises and promotions are related to traditional gender roles. For example, a woman might be denied a promotion because she took time off of work for maternity leave or to stay home with her young children.
At the same time that women aren’t making as much money as men, women also have more student loan and credit card debt than men do. More debt means less total wealth.
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Women also have shorter careers than men. Because women tend to take more time off to go on maternity leave, care for family members who are ill, and for other important reasons, women spend less time earning money – and ultimately, wealth – than men do.
Women also aren’t as involved in the financial industry as men are, and the financial industry is a key place to be for gaining wealth. According to Ellevest, “86% of financial advisors are men. 98% of mutual fund dollars are managed by men. The wealth management industry ranks worst in terms of sexual harassment. It’s a world that rewards aggressive masculinity” and the results are significant. Women lose out on wealth because of the hostile environment of the financial industry.
Finally, it’s also important to know that small business owners aren’t exempt from the gender wealth gap. Women who invest in real estate see lower returns than men do, and small business owners who are women pay higher rates on loans than men do, just to start.
The Pink Tax
There’s one other key reason why the gender wealth gap exists, and it’s a reason that affects many women on a daily basis. Because women have to pay for certain items that men don’t pay for, women spend money each year paying the pink tax. Some of these items are genuine needs, such as feminine care products. Others are items that are highly recommended due to society’s beauty standards.
Additionally, women often pay more money for the same products that men buy at lower prices. Companies often charge higher prices for women’s razors and women’s clothes, for example. They also market these products using the color pink – hence, the name the pink tax.
The pink tax is a significant reason why the gender wealth gap exists. If women had the money they spent paying the pink tax in their bank accounts instead, they could invest it and see their wealth grow.
Why Is the Gender Wealth Gap Important?
The gender wealth gap is a serious issue our society faces, but just exactly what makes it so important?
According to Women’s Way, “Without wealth, financial shocks, such as illness, unemployment and other emergencies can destroy a woman’s economic security. The consequences of not making ends meet, living paycheck to paycheck, endanger a woman and her family’s basic human rights: secure shelter, healthy food choices, quality education.”
When you don’t have wealth, it’s harder to recover from an unexpected expense. The additional financial stress may even impact your physical or mental health, which can make it more difficult to recover in several key life areas – and can create even more expenses.
What Anyone Can Do To Help Close the Gender Wealth Gap
Anyone can take action to give women a fighting chance at closing the gender wealth gap. No matter who you are, you can participate in local politics and vote for the candidates who support women’s rights. Take the time to research the issues and the candidates in your area. On a more personal level, you can also use your financial power by spending your money intentionally and making your purchases at small businesses owned by women.
If you are a mother, stepmother, or legal guardian of young children, you can raise them to use their money for good and to spend it intentionally. You can discuss the importance of supporting women-owned businesses and why it helps the world to engage in impact investing when they are older.
All women (and all folks in general) should prioritize taking responsibility for their personal finances. The first thing you can do is make sure that you’re paying all of your bills on time and not spending unnecessarily. Do what you can to pay down (and off!) any debts that you can and stick to a payment schedule.
Next, work on building up your emergency fund to protect yourself against financial shocks. It’s impossible to know what the future will bring. Whether there’s an unexpected illness, vehicle repair bill, or other expense in your future, you can get into financial trouble if you don’t have the cash to cover the expense. Start building your emergency fund as soon as possible.
Lastly, if you have money that you’re looking to invest, choose to invest in women entrepreneurs. You can also engage in impact investing to make a difference with your dollar across the board. A rising tide raises all boats, and supporting one woman could help support all women!
Read More: Our Guide to Impact Investing
What Working Women Can Do To Fight the Gender Wealth Gap
If you’re currently in the workforce or looking to join (or re-join) it soon, you can help society work towards closing the gender wealth gap through your actions. It may take extra effort, but in the end, you’ll know that you stood up for yourself and prioritized your financial well-being.
First, when the timing is right with your employer, ask for a raise or a promotion. Demonstrate the value that you bring to your team and explain why you’re worth what you’re asking for. Show that you know how much you’re worth!
On the other hand, if you’re exhausted by your current role, or if your current employer refuses to recognize your value by giving you either a raise or a promotion, then it might be time to look for a new position with a different organization.
Take the time to do your research and find a position that will pay you equitably. Pay close attention to their family leave policies – you don’t want to end up working for an employer who will penalize you for taking time off to take care of your family.
Many women are tired of the daily grind. Instead of working to line someone else’s pockets, they want to be their own boss. If that sounds like you, you may want to consider starting your own small business. However, you should make sure you have enough savings to still pay your bills and live somewhat comfortably in case getting your business off the ground takes longer than you think.
It’s also important to go into the process of starting a small business knowing all the facts. D Magazine reports that “Building a business, a common path to build long-term wealth, is more difficult for women, as access to funding remains a barrier.” Know that the journey may be a long and difficult one – but if owning your own small business is your dream, it could be worth it.
To solve the gender wealth gap problem, it’s important that more women who want to start their own small businesses receive enough funding at a fair interest rate. Historically, this has been a challenge for women entrepreneurs. But with more and more women seeking to start their own businesses, this is a trend that can be changed.
There’s Good News, Too
It’s important to know that some progress is being made in the journey to close the gender wealth gap. According to D Magazine, “Encouragingly, women are becoming increasingly involved in finances, with Bank of America research showing younger women investors are more likely to lead family financial decision-making than generations before.”
With determination and large-scale changes, it will be possible to close the gender wealth gap. But for now, focus on what you can do on a daily basis to grow your wealth.
