By Cassandra Bradford, Fall 2013 Intern
Most of us are aware that there is still an income gap between men and women, but what you might find surprising is that according to several studies, women tend to invest less than men and are less confident in their investment abilities. According to one source, less than one in five women had an investment portfolio as opposed to the over one in four men who have an investment portfolio. The statistics about men and women and their investments spark several questions. Why do women invest less than men? What are the consequences of this trend? What steps can and should be taken to change this trend in the future?
Why Do Women Invest Less Than Men?
Surprisingly, the investment gap between men and women is common across different age ranges and martial statuses. Causes for the gap include less income for women (and thus less disposable income to invest), collaboration with males, who often make many of the investing decisions, and risk aversion or lack of confidence. While some married women do control day-to-day finances, they often defer investment decisions to their husbands and rely on their spouse to maintain the accounts. Even single women often choose not to invest because they anticipate finding a spouse who will handle investments. Or, many single, young, working women either spend their disposable income or put it in savings accounts that draw less than 1% interest because they feel that it is safer and lack confidence in their ability to invest.
What Are the Consequences of This Trend?
Are there are consequences for women who don’t invest, or in the end does it all balance out? Women who don’t invest may face difficulty later in life when they have no investments or don’t know how to handle investments that are left in their control. One study shows that 90% of women will become solely responsible for their financial welfare during their lifetime. In light of this fact, investing is very relevant for women in today’s society. Women who don’t invest put themselves at financial risk either currently or in the future. For example, women who don’t invest may find themselves without significant savings for retirement and face financial hardship in their final years. Also, women who don’t invest often receive substantial investment accounts from another person, such as a spouse they survive, and don’t know how to manage the account, putting them in a vulnerable position and at risk of fraud.
What Steps Can and Should be Taken to Change This Trend in the Future?
Now that we know investing is important for women, the question is, what can we do to change this trend? FINRA Investor Education Foundation’s President, Gerri Walsh, urges women to look at their situation and take charge, encouraging women to invest on their own and make sure that they understand their investments. Women should start trying to understand investments as soon as they begin a career and then start investing so that they can better prepare their finances for whatever situation they may face.
How Can Women Learn About Investing?
There are many resources that can help women learn to invest, including the FINRA Investor Education Foundation’s expansive investment resource guide and saveandinvest.org. Both of these sites teach investors how to determine and articulate their investment goals, how to evaluate a potential broker, how to evaluate a potential investment, how to review account information and statements and what should serve as a red flag to warn the customer that something may be amiss.
By learning about and understanding investing, women can confidently enter the market and reverse the trend that has made them susceptible to financial instability and give themselves a brighter financial future.