- Not That Personal
- Posts
- So...why don't we invest more?
So...why don't we invest more?
A deep dive into the gender investing gap, why women don't invest more, and why it matters
We all know about the gender pay gap and how women, on average, still make 82 cents on the white man’s dollar. But what’s talked about much less is the other gender gap - the gender wealth gap. This accounts not for how much less we make, but how much less we keep and own over time. As of 2024, women own 32 cents on the white man’s dollar. And of course, it’s much worse for Black and Latina women, coming out to 1 cent. And what’s at the core of the gender wealth gap? The gender investing gap.
Can I ask you a personal question?
💸 The other money gap
The data on men vs. women investing is a little unclear. In 2021 NerdWallet reported that 48% of women currently have money in the stock market vs. 66% of men. But in the same year, Fidelity’s survey found that 67% of women were investing (though they didn’t survey men). And to add to the confusion, a 2023 Gallup survey found that more women (62%) than men (59%) own stock. While it’s hard to have any clear takeaways from this disparate data, it does imply that it’s not necessarily women’s investment participation rate (which doesn’t appear to be that low) but rather, other factors that play into the gender wealth gap.
So what is it?
Here’s the thing. In order to invest, women need…money. So of course the gender pay gap is relevant. On average, across the globe, women need to make at least $50,000 a year to have enough leftover dollars to invest. You can imagine it’s much higher for wealthy nations like the U.S. But let’s go with $50K. In 2021, the median income for an American woman aged 25-34 was $45,812 (compared to $50,544 for men). As women age and become parents, the gap widens with the median income for women aged 35-44 being $51,584 (compared to $64,532 for men). So for many American women, investing isn’t even an option (or if it is, they can only invest very little). This is problematic for a few reasons, but mostly because investments benefit from compounded interest over time (aka they grow exponentially every year). So it’s not just about how much you invest (though that’s certainly one important factor), but also how early you invest that matters. And time can actually beat out money. For example, if you invested $10K when you were 20 and it grew at 7% annually (the avg. stock market return), you'd have $117K by the time you were 60. But if you waited until age 30 and invested double - so $20K - it’d only be $113.8K at age 60. And if you invested that same $20K at 40, it’d just be $59K at 60. So as you can see, timing matters - a lot.
But the pay gap isn’t the whole story. While women might be invested in the stock market, we’re less active with our investments. On average, we check our investment portfolios less and are 20% less likely to change our asset allocation. Why? It’s hard to say for certain. But to many women, investing seems like a man’s (particularly a white man’s) game. 72% of financial advisors are men and Wall Street has an overly masculine brand (e.g., Wolf of Wall Street, the famous bull). So when an industry is built by and for men, it’s no wonder women have a hard time participating. And the insiders know it. BNY Mellon surveyed 100 asset managers and found that 73% believe that if there were more female fund managers, more women would be engaged investors. Yet just 10% had a female fund manager on their team.
Sallie Krawcheck, the CEO of Ellevest is on a mission to change this. Her ‘woman-first’ investment platform is focused on serving female investors, taking into account that women invest differently due to several factors including the gender pay gap, longer life expectancies, and career slowdowns resulting from caregiving responsibilities. Ellevest also invests resources into educating women about investing because study after study shows that a large majority of women don’t feel confident in investing and/or don’t know enough about it, contributing to their lack of active participation in the stock market.
Why does this matter?
According to BNY Mellon Investment Management, if women invested at the same rate as men, we’d have an additional $3.22 trillion in assets under management from private individuals. In other words, this wouldn’t just benefit women - it would benefit the overall economy. And since women tend to put more money into philanthropy, invest more in women’s futures (hello, Melinda Gates and MacKenzie Scott), and focus more on impact and sustainability than pure profit, it’s pretty certain that women having more wealth would benefit society as a whole.
Some have posited that the Great Wealth Transfer - the impending colossal shift in wealth in which Boomers will transfer their money to their children (mostly Millennials) - could help solve the gender wealth gap because women will be the main beneficiaries (Why? As men pass, they’ll cede control to their spouses who tend to be younger and live longer). While the amount of wealth expected to be transferred is debated by experts, estimates range from $84T to $129T. And it’s happening soon. By 2030, women in the U.S. are expected to own $30T (more than the national GDP). But the gender wealth gap is so massive that not even this history-making transfer of wealth will solve it.
Despite the gender wealth gap being less talked about, it’s a much better indicator of the inequalities women face because it not only demonstrates how far behind we are today, but also how far behind we’re predicted to be in the future.
What can we do?
The general consensus regarding solving the gender wealth gap is that yes, we can and should pay women more. But that’s not something we can control (or do immediately). So alongside fighting for better pay, we also need to engage more women in the conversation.
Rebrand investing from risky to rewarding - Many surveys show that a major reason for women not investing is that they find it “too risky.” But considering the average stock market return is 7.58% (and 10.51% with dividends - aka earnings - reinvested), it’s actually riskier to not invest since cash depreciates over time due to inflation (this calculator does a good job of showing how something that costs $100 today will cost nearly $130 in 2034).
Stick to the basics - Warren Buffet - one of the most successful investors in history - once challenged his own industry by betting $1M that passive investing (e.g., investing in an entire market, like the S&P 500) would outperform professional stock picking (e.g., investing in one company’s stock, like Dell). He won, so our unsolicited thoughts (not financial advice - we are not equipped to offer that!) when it comes to getting started is to do the same if not for the simple reason that putting your money into markets vs. stock picking diversifies your investments so you’re not putting all your eggs in one basket. And as you learn more about the market and investing, perhaps you’ll decide to diversify further by adding individual stocks, ETFs, etc.
Involve girls in investing - Generally, women tend to save more and men tend to invest more. PNC recently surveyed Millennial clients and found that before they became teenagers, girls were more likely to be given a piggy bank or savings bond and boys were more likely to have money placed in a CD, trust fund, or shares of stocks, bonds, or mutual funds. Given the time factor discussed above, along with the behavioral benefit of getting exposure to investing at a young age, it’s critical that as parents (and future parents) of the next generation, we educate our kids - both our boys and girls alike - about investing.
Oh and one last thing. The verdict is clear. Amongst investment professionals and everyday people alike, women consistently reap higher returns on our investments. Why? Men, more than women, tend to exhibit overconfidence and overactivity. So it turns out that the very things that make us less likely to invest - a lack of confidence and lack of activity - is what also makes us better investors. Interesting, to say the least.
Let us know what you think by voting in our poll and leaving an anonymous comment.
💭 Our two cents
What’s interesting to me about the gender investing gap is that it gets almost no attention. We celebrate Equal Pay Day and we spend a lot of time and energy discussing the gender pay gap, but no one really talks about what we should be doing with our money once we have it. In our first NTP newsletter, we explored the question, “So…do you know how much your friends make?”. And while that’s certainly important, another question we should probably be asking is, “So…do you know much your friends invest?”. In some ways, it’s an easier conversation to have because you really don’t have to share numbers. Since we all make different salaries, that might not even be helpful. But what would be beneficial is to have a more open conversation about what percent of our salaries we’re investing, how and where we’re investing, and methods for getting smarter on investing. And yet even I haven’t really had this conversation with any friends…ever. Yet when I asked my boyfriend if he and his friends talk about investing, he immediately replied “yes. all the time”. For me, it’s not about being too personal (as you can probably tell by the title of this newsletter, I’m mostly an open book). It’s honestly just something I hadn’t thought about. And since we know that not engaging women adequately is a top reason we’re not investing as much as our male counterparts, my hope is that this piece prompts us all to read about, talk about, and think about investing more. Because ultimately if it’s going to take 268 years to close the gender wealth gap, we frankly don’t have time to wait around.
✅ You should also know…
💵 Ellevest: When it comes to financial content for women, there’s really no better resource than Ellevest. I can’t speak to investing on the platform, but I’d highly recommend searching questions in their blog.
🎙️Investing 101: More of a podcast girlie? Check out this interview with Sallie Krawcheck, founder of Ellevest, where she breaks down the gender wealth gap and investing basics.
🗣️Talk about it: Since women’s lack of engagement and confidence in investing is driving at least some of the gender wealth gap, we say start talking about investing with your friends at your next wine night, girl’s dinner, etc.
💃 The girls have spoken
Last week, we asked a question that might be touchy to some: “Do you plan to get a prenup?”. We found that you all are much more open to prenups than the general population with 86% considering a prenup for yourselves (split evenly with 43% certainly getting a prenup and 43% open to getting a prenup after discussing with your partner), compared to the 50% of American adults who support prenups to some degree that we quoted in our piece. This may be because our audience leans female and unmarried, so we’re expecting to have significant financial assets by the time of marriage. Regardless, it’s encouraging to see that something that wouldn’t have even been spoken of 10 or so years ago is now something that the vast majority of us are talking about.
💌 Up Next
That’s all for today! If you liked this edition of Not That Personal, we think one of your friends probably will too – refer one (or two or three) below. ;)
Have something to say? We’d love to hear it – reply to this email or leave an anonymous comment here :)
Up next: So…is everyone getting cosmetic surgery?
💖 S & J