Let’s set aside issues of equal pay and equality in the workplace for a moment, although they do play an important role in what I’m about to say. Financial planning for women needs to be treated differently than financial planning for couples or men. Because of a number of factors that impact a woman’s earning potential, it’s important to make a financial plan that specifically addresses the situations a woman may encounter over the course of her professional life.
Financial Planning Around the Pay Gap
Let’s start with the gender pay gap. Using a common number, let’s assume that women earn $.80 for every $1.00 a man earns. The average salary for women in the U.S. in 2014 was $39,621, compared to the average man who earned $50,383 during that same period. Over the course of a career, that $.20 difference can add up to an estimated $530,000 in wage difference. That means not only half a million dollars less in earned income, it’s less money toward social security, retirement savings, and investments. Women need to plan around this wage gap to ensure a confident and financially viable future.
In addition to earning less than men, many women take breaks during their careers to have and raise children. Few women have the luxury of re-entering the workforce after an extended family leave absence and resuming their earning potential at the same pace or scale as their continually working peers. Moreover, the combined cost of lost income while out of the workforce and the added financial burden of childcare costs when they do return places women at a financial disadvantage when it comes to saving and investing.
Divorce Can Wreck Your Financial Plan
Divorce and widowhood can also have a dramatic impact on a woman’s financial plan. In the event of the death of a spouse, the loss of a dual income, added childcare costs, or the need to return to the workplace can throw the best financial planning to the wind.
Divorce also can be financially devastating for women, particularly those who have been out of the workplace for a number of years prior to a divorce. Statistics show that one in five women will fall into poverty after a divorce, and three out of four mothers don’t receive full child support from their former spouse.
Financial Literacy in the Planning Process
Perhaps the biggest gap is financial literacy for women. Many women do save but they tend to be overly conservative with their investments. The lack of investment growth over a number of years can have a dramatic effect on a woman’s financial future. Taking time to understand risk tolerance and how different investment vehicles can lead to different outcomes is an important part of the planning process.
As a woman, learning about financial planning can be very empowering. At Mooney Lyons, we know the importance of understanding what tools you need to plan for your future. We encourage you to call our office and speak with a representative who can help you navigate a suitable plan for your financial future.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Investing involves risk including loss of principal. The examples presented are hypothetical and are not representative of any specific situation.