Ever Hear Of The “Investment Gap”? It Might Be Worse.

You’ve probably heard about the pay gap between men and women, and how it could take decades to fix. But there’s another gap – and it might be keeping women from becoming millionaires.

Almost half (45 percent) of women don’t know there’s an investment gap or that they miss out on up to $1 million over their careers due to it, says a study from female-focused investing site Ellevest.

“The opportunities in money being left on the table are women’s blind spot. And this blind spot can be very expensive,” says the study. “They’re vastly underestimating how much they’re being held back by gender differences in investing.”

What’s the “investment gap”?

Men are investing their money at far higher rates than women, according to Ellevest. While men are more likely to embrace the culture of being an investor. But what exactly is investment culture?

Men (40 percent) are more likely to refer to themselves as an investor, compared to women (22 percent), says BlackRock, investment management company’s 2016 Global Investor Pulse survey. Men (46 percent) enjoy managing investments more than women (26 percent). Less than a quarter (23 percent) of women regularly review how their savings and investments are performing, while 33 percent of men do.

Men also use words like “hopeful” and “optimistic” to describe how investing makes them feel, while women are more likely to use terms like “nervous” or “risky.” It seems like women are more cautious about their finances, and men see opportunity in the risk.

Women (55 percent) are more likely to pay off debts than men (46 percent). Conversely, men are more likely to spend than women. Almost three quarters (71 percent) of women hold on to their cash in savings compared to 60 percent of their male counterparts.

“Overall, in deploying their money, women are more focused on managing risks to their financial security and stability over the short term, and men are more focused on achieving long-term money goals,” says Heather Pelant, head of personal investing at BlackRock. “In fact, American women and men have a lot to learn from one another, as good financial and investment planning needs to reflect both objectives.”

Women may not immediately see the downside of their lack of investments, but as they get closer to retirement age they will.

A hopeful future?

The rate of women who are confident in their investment decisions, and optimistic towards their future finances, has increased over the past few years.

How women feel about finances

  • 2015: 46 percent felt confident in their future finances – 34 percent said they were making good investment and savings decisions.
  • 2016: 51 percent felt confident in their future finances – 42 percent said they were making good investment and savings decisions.

If there is one thing women need to improve upon – it’s their retirement savings, says BlackRock. Women (55 percent) save less than men (65 percent) for retirement. Women (75 percent) are also more concerned about meeting retirement goals than men (68 percent).

The women, who have started saving for retirement, have built up a $35,000 nest egg, while their male counterparts have saved $77,000, says BlackRock’s 2015 study.

The problem is – women will outlive men. The life expectancy for women is 79 and 72 for men, according to the study. It recommends for women to plan to save for their finances to last 10 years longer than men.

“Blessed with a longer life, it’s all too likely women will come to find that once they retire, it will last longer than they had planned,” Pelant says. “Luckily, more and more women are becoming engaged investors, especially at a young age. That engagement will be crucial to helping provide retirement income in our increasingly long life.”

 

 

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Joe Pye

Joe Pye

Associate editor

Pye is the associate editor of Debt.com.

Budgeting & Saving

income, money management

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Article last modified on April 5, 2018 Published by Debt.com, LLC . Mobile users may also access the AMP Version: The “Pay Gap” Has Nothing On This Gap - AMP.