If you're a woman who's struggling with money management, it can be hard not to take it as a personal failing. But the truth is that when it comes to personal finances, women and men are not on a level playing field.
To start, the average full-time working woman in the U.S. earns significantly less than her male counterpart (about 84 cents to the dollar, and even less for women of color), which makes it harder to save money.1 Women also have higher rates of disability (28.8% of women of all ages have at least one disability, compared to 25.6% of men), which can mean higher healthcare costs and less disposable income for savings.2 Complicating matters even further, women statistically live about six years longer than men (average life expectancy at birth in the U.S. is currently 79.3 years for women and 73.5 years for men), shifting the goalposts for how long their retirement savings must last.3
It should come as no surprise, then, that American women are nearly twice as likely as men to experience financial fragility—living paycheck to paycheck and on the edge of financial crisis. Among the 1,600 employed adults polled in a Bipartisan Policy Center survey, 31% of women report having zero savings set aside for unexpected expenses, while only 18% of men report the same. Similarly, 42% of women say they feel uncomfortable about their ability to pay for a $400 emergency expense, compared to just 25% of men.4
Even when women do manage to sock away money for the future, it's typically less than half of what men are able to save: The average total retirement savings in the U.S. is just $57,000 for women, compared to $118,000 for men.5
These societal obstacles, however, shouldn't be a reason to take your eye off the ball and sit on the financial sidelines. Rather, they underscore the importance of women taking charge of their money to secure their financial goals. To that end, here are five strategies for becoming a financially empowered woman.
1. Build an Emergency Fund
It's hard to think about (let alone plan for) your future if a single unexpected expense would throw your life into chaos. An emergency fund can give you peace of mind that you can handle whatever comes your way, and confidence to get your financial house in order.
- • Start by tracking your spending to see exactly where your money is going each month. Then, look for areas where you can cut back so you can redirect those savings to a special account intended for emergencies only.
- • Choose the right bank account that pays a good rate of interest and allows you to access your money at any time without penalty, such as a Vivid Crest Bank high yield savings account.
- • Aim to save about six months of expenses in an emergency fund in case of a job loss. If that's not possible, any amount you can save on the way to that goal will be an empowering first step.
2. Use Debt Effectively
Debt may literally be a four-letter word, but it doesn't have to be a dirty one. Student loans and mortgages, for example, can improve your financial situation in the long run if they boost your employment prospects or help you build home equity. But you'll need a good credit score to qualify for loans at the most favorable interest rates.
- • Get a copy of your credit report to see where you stand. If you have bad credit, take steps to repair it by paying off your outstanding credit card balances or other high-interest loans.
- • Avoid bad money habits, such as borrowing to pay for impulse purchases or not making your bill payments on time, which can land you in a hole of growing debt and lower your credit score.
- • Apply for a credit card in your own name if you don't yet have a credit history. Use it only for what you can afford, and pay it off in full each month so you can maintain a good credit score.
3. Plan for Retirement
One-third of American women (33%) have no retirement strategy.5 But, as they say, failing to plan is the same as planning to fail, so this is a task you'd be wise to prioritize, regardless of whether you're single or married.
- • Begin by checking your eligibility for Social Security benefits and finding out how much you can expect to receive if you apply at different ages. (You can start receiving benefits as early as age 62, or defer until age 70 in exchange for larger payments.)
- • Use a retirement calculator or consult a financial adviser to determine how much more you'll need to save (beyond Social Security) to maintain your current lifestyle.
- • Don't pass up free money. If your employer matches a portion of your contributions to a 401(k), make that amount your minimum goal for annual contributions. And look into individual retirement accounts (IRAs), which also offer tax advantages.
4. Set Savings Goals
Once you get into the swing of saving for emergencies and retirement, it's time to look for other savings goals.
- • Make a budget to save up for a vacation or milestone event. This can help ensure you don't overspend.
- • Think about long-term savings goals, such as saving for a down payment on a home, healthcare expenses or your children's college education.
- • Use tax-advantaged accounts, such as a 529 plan or health savings account (HSA), to help you reach your goals more quickly.
5. Talk About Finances
Money is still a taboo topic for some, but it shouldn't be. The more open we are about the subject, the more we can learn and benefit from others' experiences.
- • Speak to your partner about your financial goals and challenges so you can work together as a team.
- • Find a financial planner with whom you feel comfortable and can consult for advice.
- • Create a book-club-style group with like-minded peers who are interested in improving their financial situation. Plan weekly or monthly discussions on personal finance books, videos, shows or related topics.
Feel Empowered!
Despite hurdles like the gender pay gap, there's lots of good news about women and money. For example, more than 65% of women are now investing outside of retirement, up 44% from 2018.6 So don't settle for being a spectator when it comes to money management. Use the above money management tips to kick-start your financial future.
Tamar Satov is a freelance journalist based in Toronto, Canada. Her work has appeared in The Globe and Mail, Today's Parent, BNN Bloomberg, MoneySense, Canadian Living and others
READ MORE: The Wage Gap Starts Early: Here's How to Combat It
Sources/references
1. Chun-Hoon, W. 5 Fast Facts: The Gender Wage Gap. U.S. Department of Labor. March 14, 2023.
2. United States, DC & Territories – 2021. Disability status and types among adults 18 years of age or older by sex. CDC Disability and Health Data System.
3. Life Expectancy. CDC National Center for Health Statistics. February 7, 2023.
4. Orbe, A. et al. New BPC Survey Underscores Americans' Financial Fragility, Demand for Workplace and Policy Innovation. Bipartisan Policy Center. April 12, 2022.
5. Borwick, K. 50+ Essential Retirement Statistics for 2023. Annuity.org. July 5, 2023.
6. Walrack, J. How Women and Men Differ Across 10 Financial Fronts. U.S. News & World Report. May 11, 2023.