Happy International Women’s Day! There’s a lot to celebrate, and I genuinely believe we’re making significant and important progress around the world.
The premise of the United Nations’ IWD is Women in the Changing World of Work: Planet 50-50 by 2030. So as I put on my Debbie Downer beret 🎓, there’s a lot to be dissatisfied about, a.k.a. a lot more work to do. No country has achieved gender equality yet. The good news? We’ve started our journey, and we’re going to tear it up 💪.
Most of us probably know about the pay gap— women earn less money. A lot less, in almost every environment. Understanding the gap’s root drivers is crucial for future progress. But it’s also crucial that we recognise its flow-on impact.
The big cheese
The pay gap is just the beginning of a measurable divide, like the end of a wedge of parmesan 🧀. What is rarely discussed is the gender gap in savings, and the further gender gap in investing. Because of these, over time, we end up with a money gap that’s more a yawning chasm. The rind end of the parmesan. And it’s pretty tough to chew on 😷.
A clear reflection of this is in retirement. One in three women have zero superannuation, while 40% of single retired women live below the poverty line. Women retire with less than half the super of men. This is directly linked to earnings, but the problem is more complex.
How it begins
Despite making up the majority of university graduates, women are paid up to 8% less than men as soon as they start working. That means immediately, our ability to save is hurt by lower earnings.
Suncorp found that women under 34 save almost a third less than men on a monthly basis, and according to Commonwealth Bank, a key barrier to savings potential in millennials is lack of income.
Mind the gap
Over time, this earnings gap widens, and kicks up a gear when women have children. Taking a break from paid work as a primary caregiver, or working part-time obviously impacts your earnings. But KPMG and the Diversity Council of Australia have found that biggest single factor in the pay gap is actually gender discrimination.
On average, women earn $700,000 less than men in their lifetimes. In university graduates with equivalent degrees, a man will earn 1.8 times more than his female counterpart.
So it becomes clear how that savings gap can become immense.
Invest, don’t rest
To snowball that difference in savings, there’s another gap, this time in investing.
Women are more likely to put savings into cash or term deposits rather than shares or bonds. Women are also less likely to actively allocate their super. Yet when women do invest, it turns out they make better investment decisions and make more money.
☃️ Going back to the snowball effect, by not investing we’re not only eroding our savings from the impact of inflation ($100 today isn’t worth $100 tomorrow as stuff gets more expensive), but also missing out on the🌟magic🌟 of compounding. If you can bear the risk and have a longer-term horizon, it can make a bigger difference in the long run than even upticks in your earnings.
Hey big spender
On top of that, women make the majority of spending decisions. Not all spending is bad spending, but if you take a day noticing the noise and advertising on our phones, on websites, and billboards, it’s clear that women are constantly being primed to spend, and mostly on crap. Men are too, but that’s mitigated to some degree by relatively higher earnings and financial engagement.
Stop defining me
The roots of these gaps start well before getting our first paycheck. There are so many entrenched social biases and structural mechanisms that it’s hard to know where to begin. But it starts early. In children as young as six, a gender gap already appears in numeracy, and it is linked to pressure to conform to gender norms. Men=STEM, women=humanities. That’s unfair for women and men. Those deeply limiting social norms continue into adulthood, with wealth and financial literacy characterised as masculine attributes.
We’ve talked about how money is a basic driver of happiness 🤑. This isn’t to say that having a private jet for the private island will make you happy 🏝. What it does refer to is a basic human right: the freedom to choose.
Financial independence increases your ability to say goodbye to a horrible boss, to take that dream job that pays peanuts, or to walk out on a bad relationship. A lack of financial independence results in fewer choices, potential entrapment, and increasingly, deep anxiety. This is the crux of the financial gap. Women are more likely to be bound by financial inequality.
What can we do?
This is everyone’s responsibility— the government, employers, financial institutions, our communities, and on us as individuals to make some noise.
There are little things we can do with our money lives that will become big things over time.
Like, keep pushing for that pay rise. Benchmark against salary surveys online like Glassdoor, talk to your industry peers and talk to recruiters. Don’t feel guilty and negotiate hard. Start talking about money with your friends and colleagues so it’s not this ridiculous taboo. Talk to your managers and HR about the pay gap and ask them to articulate their view and commitment to closing it.
Next stop, identify your savings goals and start going for them. Pay off expensive debt if you have any, from credit card to car loan. If you got that pay rise, try not to spend any more than you did last year. Sweep that earnings uptick into your savings. And check yourself when you see that ad for a new perfume. Will it really make you happy?
Once you’ve started saving and know your goal/s, think about your risk tolerance relating to your goals. Leave that lack of confidence at the door, and really consider investing. As a start, take a look at your superannuation and move your money into low-cost funds.
Yes, we know that all of what we’ve suggested is tough, complicated and boring. We’re working on it, and we’ll be covering the different steps in upcoming posts so they’re easier to tackle.
In the meantime, leave us a note or email us about what you want help with most. Let’s close that gap!