Men and women both wear the jeans in heading today's households, but they still have gender-unique wallet-handling issues due to "jeanetic" differences and societal circumstances. Although these differences don't uniformly favor one gender over the other, they collectively challenge women more by limiting their incomes, making their lives more expensive and complicating money management.
Confronting this challenge is the next step in the female financial revolution, which began with women becoming a permanent fixture in every part of the workplace. They first conformed to the expectation that they dress and act like male managers and executives whose jobs they aspired to - but they ultimately succeeded by understanding and accepting male business behavior, while embracing their own gender-unique traits to rival male professional success. Women can now apply those workplace lessons to their personal "wealth-place" financials. Regardless of relationship status, they can increasingly take full charge of their own financial fates by embracing and adapting for their unique fiscal gender characteristics.
The biggest gender difference is no surprise; studies, such as the one published by the United States General Accounting Office in 2003 entitled "Women's Earnings", show that women are paid at a lower rate and earn significantly less overall than men - thus accruing lower Social Security benefits and retirement plan accumulations.
But, the reasons are surprisingly complex:
- Total Work Time
Because caregiving tasks (for kids, elderly parents and/or extended family) traditionally falls more on women, they end up having less time to devote to work. Single women without children are often seen as more available to care for an aging parent. These responsibilities cause them to more often opt for work that requires less travel and overtime, and also take more family leave, all of which affects career advancement. Although men increasingly have joint custody, single women are more often custodial parents, requiring them to take more time off, work fewer hours or develop a scheduled work relationship (such as telecommuting) where they can work from home.
- Career Choice
According to a study by Shelly J. Correll entitled "Gender and the Career Choice Process: The Role of Biased Self-Assessments" published in the American Journal of Sociology in 2001, parents, teachers and particularly the popular culture send a message based on traditional cultural beliefs to a significant percentage of girls. This message says: their career planning and choices are less important than boys' choices - although more than 55% of full-time college students are female. So it's not surprising that they're attracted to careers in traditional female-track or lower-paying jobs, where alternate work arrangements are usually more available. Statistics show that adult women with children (or women planning to have children) disproportionately favor such careers despite widened opportunities in all fields - such as scientific research and applied science, where women are woefully under-represented.
Furthermore, women less frequently choose more physically dangerous professions - such as law enforcement - that reward higher risk with premium wages and pensions. Most significantly, women are controlling their work schedules by starting businesses - often from home when children are very young - to the tune of more than 10 million female (majority-owned) U.S. businesses.
- Divorce and Widowhood
The divorce rate is around 40% and the average age of widowhood is around 56; both forms of "losing" husbands are hazardous to women's financial health. Changing and evolving divorce laws and the way courts apply them (See the Divorce Research Center's guidelines), combined with women's increased numbers and earnings in the workplace, have put downward pressure on the length and amount of spousal support negotiated by or awarded to women (while also modestly increasing instances and amounts awarded to men). So women who leave ultimately lucrative careers to become stay-at-home mothers are often forced to work for inadequate pay when the support runs out before they've been able to catch up with experience, education, skills and experience needed for higher compensation. Similarly, pre-retirement homemaker widows are sometimes left with insufficient life insurance or other assets and, as a result, are also forced into low-paying jobs because they can't afford full-time education to jump-start a new career.
- Social-Security Formula Anomalies
Women are disproportionately hurt by the average-of-highest-35-years earnings formula, both because of getting zeros for non-working years and because earnings are limited by the taxable caps in each year. Thus, a woman who spends several years earning small amounts while establishing a successful business doesn't get full credit for six-figure earnings once the business becomes successful. Furthermore, divorced women are entitled to get the potentially larger husband-based benefit only if the marriage lasts at least 10 years - and then (along with widows) lose the right to that benefit under some circumstances if they later remarry. This can be grossly damaging to Social Security benefits if these women were mainly stay-at-home moms during their first marriages.
- Lower Raise Expectations
Women tend to be less assertive than men about asking for raises and often less effective at negotiating them.
- Residual Discrimination
A shrinking but still significant part of the wage gap remains due to lingering discriminatory attitudes about women's professional commitment, which ultimately reduces their share of higher-paying jobs, promotions, professional partnerships and funding for major entrepreneurial business ventures.
The longer you live and the more years you have of not earning income, the more it costs and the more years of earned income you will need to offset those costs. This adds up when you consider that the life expectancy of women is about five years longer than men. Combined with their greater resilience compared to men who succumb faster to chronic diseases, this results in (mostly single) women spending more old-age time getting in a savings-depleting, expensive long-term care service (such as in-home nursing care or in assisted living, rehabilitation and nursing facilities). Finally, even young women's health care is more expensive - as reflected in an average $25 per month higher premiums for individual health insurance.
Women also have several potentially higher living costs:
Looks do matter. Attractive people tend to make better career progress in the business world. Add in societal expectations regarding female attractiveness and what's appropriate in the workplace, and that makes it very enticing for women to spend much more for high-end clothing, cosmetic items, personal care and, in extreme cases, cosmetic surgery.
- Safety and Security
Women by nature tend to be more risk averse - especially as mothers - so their choices in vehicles and safer-neighborhood housing cost more.
- Money Momma
Women may spend more on holiday gifts for friends, family and associates. Furthermore, women's willingness to open their purse strings is a new emphasis of charitable organizations, who are increasingly targeting female donors for larger gifts - given women's improved financial status, more altruistic attitudes and higher percentage (but lower per gift) affirmative and continuing response to charitable appeals.
Money Management and Investing
Although married women have traditionally been in charge of managing the checkbook, their husbands still make most of the major financial decisions regarding big-ticket purchases and investing. And children of divorce or of single parents more often grow up in financially strapped families that invest less and made fewer big purchases. When combined with statistics showing 80% of purchases are female-driven (direct or decision), this makes a case for many women being more prepared for smart, substantial spending than for stingy saving and informed investing.
The Bottom Line
As investors, women face unique challenges both in terms of making money and making that money grow for the future. Despite this, women also have equal access to investing and investment advice. Accumulating adequate resources for longer lives and higher health-care expenses requires substantial savings coupled with reasonably aggressive investing - both of which women are more than able to do.