A large part of the gap can be explained by lower labour market participation, which is further compounded by the wage gap (the ratio of the wage of women to that of men in a similar position), which globally is still an astonishing 37% difference.
To complicate matters further, according to a survey of Fidelity, women actually save more than men, but only for a small percentage. Women save around 9% of their annual salary and men 8.6% of their salary. The difference in annual salary for both groups, is actually the main cause for the gap and saving alone will not help enough to close it. On top of that, the average interest on savings account is much lower than the return of investing money in the stock market. Yet, fewer women than men participate in the stock market.
So here’s the picture: fewer women are in the workforce, and those with a job tend to earn less than their male counterpart, and even though they do save more, their savings are not giving the most returns. In short, by not investing, women are setting themselves back when it comes to taking control of their financial future.
There is more to lose by not investing, so why not start now? Here are three very real reasons why women should invest today.
1/ Women live longer, and need more retirement funds than men
While earnings for women are in general less than for men, according to the World Health Organisation, women live on average six to eight years longer than men. That means that if women want to have additional funds available at retirement, women need to have a bigger amount available than men, to cover for a larger number of retirement years.
2/ Investing is the only option if you don’t want your assets to diminish
With interest rates on savings at around 0%, and inflation around 3% globally, investing is not only necessary to grow your assets, but in the first place to avoid the diminishing of these assets.
Research shows that not participating in the stock market for retirement and other savings yields a welfare loss of 12%. With the interest rates around 0% or even negative figures, investing becomes even more important to grow your money than ever before.
3/ You work hard, so why not make your money work as hard as you do by investing?
One of the most important ways to take care of one’s financial future is to make sure your money is working as hard as you. By earning interest on a savings account, dividends from holding stocks or rent on investment properties, the money that you make by savings and/or investing in stocks or real estate is passive income, when your money works for you while you ‘sleep’.
In 2020, Saxo globally increased its new women investors by 354% compared to 288% for men – this is very encouraging. However, the split between female and male investors can be closed further. The investment gap is one that women can solve themselves, without the help of others, by taking action, today. Do your homework, make a plan and stick to it and you will thank yourself later. This is a straightforward way to significantly improve the financial lives for women.
The journey to build towards financial freedom is a long one and it requires attention, focus and determination. By investing regularly, we diversify our income streams with a supplement on our income or retirement. This will not only benefit ourselves, but also can benefit our loved ones. It will be full of challenges and the strategy has to be adjusted as our lives naturally evolve. But it is a very powerful, worthwhile and empowering journey to embark on, so start now.