Can the future really be female if an unspoken gender wealth gap keeps quietly eating away at women's futures? While women have been shown to outperform men at investing, they tend to shun the stock market for the deceptive safety of cash savings, leaving men to reap the gains — and keep a grip on the world's private wealth.
XThis disconnect between women and Wall Street runs deep. Hollywood portrayals only underscore the divide, from the chest-thumping boys' club in "The Wolf of Wall Street" to "Sex and the City" heroine Carrie Bradshaw. As she once said about investing, in a phrase that launched a thousand Etsy posters: "I like my money right where I can see it — hanging in my closet."
In the real world, millennial women in particular are financially vulnerable. The wage gap gets the bulk of the credit for this divide, but it's not the only factor at play. Not investing can amount to a gender wealth gap hundreds of thousands of dollars big over the course of a lifetime. And that can mean the difference between being in control of the future and being swept away by the undercurrent of daily expenses.
"One thing we realize more than ever these days is that money is power. And that if you don't have as much money as the guys do, it can put you in a tough position," says Sallie Krawcheck, CEO of investing platform Ellevest. "It can keep you in a job you don't want to do. It can keep you in a relationship you don't want to be in. It can keep you from taking that trip around the world, or starting the business you've been dreaming about."
$1 Million Gender Wealth Gap
Compared with the average single man, the average single woman's net worth is three times smaller, according to a joint study from Merrill Lynch and Age Wave.
Pay equity is part of the equation, compounded by the fact that women are more likely to pause their careers to raise children and take care of aging parents and spouses. Compared with a man with no workforce interruptions, the average woman cumulatively has earned $1.06 million less by the time she hits retirement age. That's an enormous wealth gap.
"Women, generally, we're leaning in to our careers and we're becoming much more comfortable around being ambitious professionally. But we're not having that same dynamic (with our money)," says Jennifer Barrett, a former CNBC personal finance editor and the current editor-in-chief of Grow, a web publication from micro-investing app Acorns. "It's to our detriment if we don't invest."
No matter where you look, the numbers are pretty straightforward: Compared with men, women are tepid about the stock market. Some 57% of women didn't invest a dime in 2017, vs. 44% of men, according to a recent Acorns study. If handed a thousand bucks, 2.5 times more men than women said they would put that money in stocks.
The wealth gap extends to retirement savings. Women also fall behind men in 401(k) participation and contribution, says the Transamerica Center for Retirement Studies. And a PNC Investments poll found that female millennials with investable assets had an average of $66,700 saved or invested for retirement vs. an average of $101,500 among men of the same age. (More broadly, the reality is bleaker: two-thirds of all working U.S. millennials aged 21 to 32 do not have anything saved for retirement at all, according to the National Institute of Retirement Security.)
Some women are already feeling the fear of missing out.
The Merrill Lynch/Age Wave study found that 41% of women said their greatest financial regret was not investing more of their money. That even trumps career, credit-card and lifestyle woes.
Thirty-year-old Caroline Rhoads, an account director at a marketing firm in Philadelphia, said Wall Street "seems very intimidating."
She has consulted a financial planner once, invested around $1,000 through a Robinhood account, and feels good about her 401(k) and financial future. But she invests conservatively, "because I feel like if I'm going to invest I need to know what I'm doing, and I don't."
Bridging the gender wealth gap through investing may seem abstract and distant, particularly for 20-something women mired in student debt, decades away from retirement. But there are serious consequences for not at least trying to get the ball rolling.
"In not being comfortable investing, what you're saying is you're not comfortable building wealth," says Barrett. And the gender gap there is "growing, not shrinking, even as women are earning more and closing the wage gap. We still have a gaping wealth gap."
If it's so important, why is there a dearth of female investors? What accounts for this wealth gap in the market? More than a couple of things, it turns out.
1. Wall Street's Not Trying To Attract Female Investors
Think back to "The Wolf of Wall Street" and Leonardo DiCaprio's testosterone-fueled, Martin Scorsese-directed yacht parties, filled with models and bottles. And earlier this year, an E-Trade Financial (ETFC) ad showed men cavorting with bikini-clad women on a yacht. Who wouldn't want to be associated with that lifestyle?
Uh, women.
"I can't help but equate Wall Street with the a**hole bros filling lower Manhattan bars most nights, who drink too much, act rudely toward women, and generally behave badly," wrote Refinery29's Work & Money Director Lindsey Stanberry in a 2016 story on how to invest. "Do I really want to put my hard-earned money in their hands? (No.)"
Ellevest's Krawcheck says the fact that the investing gender gap even exists "tells me that women are not being well served by the existing investing industry and by Wall Street."
She should know. Her Wall Street cred includes stints as the head of Merrill Lynch and Citigroup's (C) wealth management divisions. Now she is a vocal proponent of something she calls "financial feminism," or wealth equality between men and women.
And no, the solution isn't slapping a bunch of pink labels on existing financial products. Of her days at the heavyweights, Krawcheck said efforts to appeal to female investors didn't consider their financial desires.
Ellevest's "gender-aware" investing algorithms, she says, consider key differences about women. Their salaries peak sooner than men's. They earn less over their lifetimes. They are more likely than men to outlive their resources.
So she aims to help investors reach their goals, not beat the market. Wall Street's obsession with outperforming the stock market indexes "leaves women completely cold," she says.
Female investors are more interested in reaching certain milestones, such as retiring at a certain income, buying a home or starting a business, she adds.
2. The Risk Factor For Female Investors
And she's quick to dismiss the notion that women's risk aversion toward stocks drives the investing gender gap and the wealth gap.
"It's not that she's risk averse, she's risk aware. And the industry has done a poor job explaining risk to her," said Krawcheck of female investors. "When she understands it, she's happy to take it."
But it's true that women are doing less with their money. Financial services startup SoFi found that men contribute 32% more to their investment accounts than women do, and tend to invest more aggressively.
Meanwhile, women are equally or more confident than men in paying bills and setting budgets. But they're far less confident about managing their investments, say Merrill Lynch/Age Wave researchers.
Maybe that's why female investors keep more of their money in cash. According to an oft-cited BlackRock study from 2015, female investors keep 68% of their portfolios in cash vs. men's 59%.
The apparent safety of a savings account, however, is deceptive. Over the long run, hoarding cash is a terrible way to increase net worth. Consider the math: Interest rates on savings are near zero while inflation is now 2%, which means that $1,000 in the bank today is objectively worth less in the future.
Additionally, it pays to take advantage of compounding interest.
Say you invest $500 tomorrow in a low-cost index fund that tracks the S&P 500. Then add 50 bucks to that account every month thereafter. Say it grows by an average 8% every year. (Over the last 90 years, the average yearly return for the S&P 500 has been 9.8%, even accounting for crashes.) In 30 years, a no-interest savings account would have grown to $18,500. Your investment in the stock market would have amassed $73,001.26.
3. Stock Market Distrust
Still, that's easier said than done for those who don't trust Wall Street. There's a whole generation of women and men who remain deeply distrustful of the stock market. Both the dot-com crash and the Great Recession blindsided them in their formative years.
"In a short period of time, they saw two recessions and two market meltdowns," says Bankrate Chief Financial Analyst Greg McBride. "Those memories are fresh. So a lot of (millennials) just never warmed up to equities and have taken a naturally risk-averse stance, detrimental though that may be to their long-term financial health."
Younger people prefer real estate and cash over the stock market, according to Bankrate surveys. And millennial women in particular are in a financially precarious position.
"Here's my concern, and it's heightened for millennial women," says McBride. "Millennials are going to have the biggest retirement savings burden in history," thanks to longer life spans, fewer pensions, more uncertainty around Social Security, and higher health costs than any generation before them. And holding on to safe-haven assets like gold, he says, is not going to cut it.
"To accumulate retirement savings, you need the power of compounding to do the heavy lifting."
Michelle Trejo, a 29-year-old quality assurance engineer in Los Angeles, says that her main vehicle for retirement is her 401(k), though she isn't sure how much she's contributing. Once she saves more money, she is looking to invest in real estate, and then potentially in the stock market.
"I wish I knew how to play (the stock market)," says Trejo, who has dabbled in cryptocurrencies, a far higher-risk investment than stocks. "I know there's a lot of money there. I just don't know how to get started."
4. Gender Gap In Cultural Messaging
Some experts venture that women get a one-sided directive about what to do with their money: Spend it.
"Generally speaking, if you look at who's spending money on clothes and keeping up with the trends," says Barrett, "it's not men. It's women."
Think about how many magazines or style blogs talk about buying "investment pieces": a classic necklace, a blazer that will never go out of style. An analysis from purse reseller Baghunter will have you believe that a Birkin bag from Hermes is a better purchase than gold. Of course, that assumes you hold on to the bag for 35 years and keep it in mint condition.
"When we talk about buying a handbag as an investment, it makes me cringe," said Barrett.
That mindset extends beyond the investing gender gap to the venture-capital world.
Men with wealth are encouraged to amass more wealth, said The Helm CEO and co-founder Lindsey Taylor Wood at the recent United State of Women conference. Her venture fund invests in female entrepreneurs.
"Their buddies are like, 'Get in on this deal, invest in this company, buy this stock,' " she said. By contrast, "women with wealth are invited to give their money away. 'Chair this gala, join this nonprofit, be on this board.' "
5. Women (And Parents) Don't Talk About Money
A notable 61% of women would rather chat about their own death (!) than talk about money, according to Merrill Lynch/Age Wave data.
"In our society, talking about money is pretty taboo for women; we learn this from childhood," says Ellevest's Krawcheck. "If you're not talking about money, how do you know what raise to ask for, or how to invest? The answer is: You don't. And women are the poorer for it."
That deep-rooted behavior is encoded early on. In fact, 63% of millennial women vs. 53% of their male peers learned from their parents about saving money at an early age, according to PNC Investments. But only 29% of those same women said their parents showed them how to grow wealth, vs. 37% of men.
"(There are the) stories that we tell ourselves and the stories that we've heard and internalize," says Acorns' Barrett, who is writing a book about the gender wealth gap. "That investing is hard, that you need to be wealthy to invest. Women in particular get that message a lot. And if you look at the research — even the way parents talk to their sons and daughters about money is different."
Kathy Mirescu, a 40-year-old director of product design, is far from the norm when it comes to enthusiasm for personal finance. It is a quality the Los Angeles resident learned from her mother, a self-taught commercial real estate investor with an accounting background who "was always looking for investment opportunities and would talk about them" openly with her three children.
"I just grew up not really thinking about it, until I became a lot older, and I started realizing that a lot of my friends, a lot of my peers, who are college educated — a lot of them have advanced degrees — didn't know a lot of the things that I just knew" about finance, said Mirescu.
She bought her own condo at just 29. The down payment came from cash and proceeds from the sale of blue chip stocks that her mother bought for her early on in life.
Now Mirescu wants to start an investing club that will help her friends and other women become more financially literate. "To just simply have a place where we all get in a room," she said, and "help each other set up Roth IRAs."
6. A Lack Of Big-Money Female Role Models
Acorns' survey found that 42% of women chose Oprah as the person they'd be most likely to take investing advice from. More than half of men chose Warren Buffett.
That likely speaks more to women's trust in Oprah than the gender wealth gap, says Barrett. But it also serves to highlight how few female investors are well known on Wall Street.
"If you think about really famous investors — can you think of a woman?" she said. "We don't have a lot of female role models." (According to the Merrill study, 45% of women don't have a financial role model, to be exact.)
Krawcheck, who took the stage at the United State of Women conference to hearty applause, is an emerging rock star in the realm of financial feminism. At the mention of the Ellevest founder, Mirescu starts "fan-girling." (Her words.)
She, too, sees money as a "feminist issue."
"It's about having choices, and money gives you the freedom to have choices," says Mirescu. "And choice is a linchpin of feminism."
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