How men and women differ when it comes to money, from credit scores to self-confidence
Women account for more than half of the consumer spending in the U.S., manage a growing share of investments, and are increasingly the primary breadwinners in their households. Yet despite their influence over American household dollars, women still lag in other, related, areas — from wages to their confidence about their own financial wherewithal. Groups advocate for such issues on Equal Pay Day, which falls this year on April 4.
Financial experts say many of women’s money problems come from their earning less over the course of their lives. Because of factors including their choice of professions and difficulty advancing in their careers — whether because of discrimination or because of taking on more unpaid work outside the home, including caring for children — women in the U.S. make about 80% what men do. Black and Hispanic women earn less than white women.
Here are six ways men and women differ when it comes to money, according to sources including the Census Bureau, financial services institutions and a credit score company.
Men make more for the same work
Women make about 79% of what men do for the same work, according to a 2014 comparison of the median earnings of full-time, year-round workers. (That’s the most recent year for which the Census Bureau provides data.) Black and Hispanic women make a smaller percentage of what their male counterparts make than white women do.
A gap exists for highly educated workers: A 2015 Bloomberg analysis found that while men and women made similar salaries when they graduated from business school in 2007 — $105,000 for men and $98,000 for women — by 2014 those same workers had seen their salaries diverge. The men were earning $175,000, compared with $140,000 for the women.
Reasons generally cited for the “pay gap” include women being less likely to work in higher-paying fields, hold high-ranking positions and negotiate for salaries and raises.
(There also appears to be a gap in perception: In the U.S., 78% of men believe men and women at their company are paid equally for equal work, while 60% of women believe this, according to a 2015 survey from job site Glassdoor.)
Because women earn less than men overall, they tend to fall behind on other important aspects of their personal finances, including their credit scores and savings.
Women are better at managing personal debt
Although women earn less than men, there is evidence they are better at managing personal debt.
According to an analysis of 2015 data from credit-score company Experian, women had slightly higher credit scores than men — 675 for women, compared with 670 for men. Men also had slightly more average debt (including credit cards, auto loans and personal loans, but not mortgages) than women, at $27,627 for men and $26,610 for women.
The median U.S. credit score is within the “good” range of 670 to 739, according to Experian.
Income isn’t directly a factor when it comes to credit score, but lower wages can make it harder to pay bills, leading some to use more of the credit available to them. (And credit score isn’t the only factor lenders consider, according to consumer credit expert Beverly Harzog: Other aspects of financial health, including employment history and savings, also matter.)
Women also had more credit cards open in 2015: Women had 3.7, while men had 3, according to Experian.
Credit cards can actually help credit scores, when they’re paid in full each month and the bearer uses a small proportion of the credit available to her.
Men pay off their student debt faster
Three years after graduating from college, women had only paid off 33% of their student debt on average, compared with 44% for men, according to an analysis of 2012 data released by the American Association of University Women. African-American and Hispanic women paid off even less — 9% and 3%, respectively — during that period.
Wages play an important role in those statistics; when you earn less, paying off loans is harder.
Student loan debt, meanwhile, tends to take up a larger share of women’s income than it does men’s, according to Washington-based Institute for Women’s Policy Research.
Student loans can have lasting effects for both men and women, from making saving for retirement more difficult to driving the postponement of major life decisions such as homeownership and marriage. Men save more in their ‘rainy day’ funds
Americans are notorious for having little money saved.
According to a BMO Harris Bank survey of about 3,000 Americans in January 2015, 69% said their current rainy-day fund — or, money saved for future emergencies — would last less than a year; 29% said it would last one month or less. Experts recommend having enough emergency savings to last three to six months.
The picture is bleaker for women. For those with rainy day funds, the average was $46,362. Men reported funds of $58,061 on average, compared with $33,558 for women. That’s a big difference — nearly 58%.
When emergencies arise for people without savings, the BMO Harris research pointed out, they often turn to liquidating their retirement accounts, which comes with financial penalties. They may also take on more debt, sometimes at high interest rates.
Women use sounder strategies, but with less confidence
Although women may have less to invest, they often employ better investing strategies with the money they do have, according to online investing company Betterment.
Women change their fund allocations and monitor their accounts less frequently than men do, according to Betterment — behaviors the company says are generally better for retail investors because more frequent changes in portfolio allocations tend to diminish returns — as do the short-term capital gains tax hits they can lead to.
But women are also less confident then men when it comes to their belief in their knowledge of financial matters.
According to a 2013 Prudential study, women were much less likely to say they felt confident about their knowledge of financial products, including IRAs, estate plans, stocks and bonds, long-term care, mutual fund and annuities.
They were also more likely, at 13%, to say they were a financial “beginner”, compared with just 3% of men; While 45% of men said they felt “very well prepared” to make important financial decisions, just 20% of women did.
Men save more for retirement
Women are more likely than men to set up retirement savings accounts, according to 2014 data from investing company Vanguard, but men have more money in theirs.
Women are 14% more likely to participate in their workplace savings plans than men, according to Vanguard, and they save at higher rates than men at all income levels. But because men’s average wages are significantly higher, they have account balances that average more than 50% higher than women’s.
That contributes to women having substantially lower retirement incomes than men, according to an analysis released this month by National Institute on Retirement Security — and, in the worst cases, leave women 80 % more likely to be impoverished at age 65 or above.
That said, Vanguard notes that even someone saving at a low rate can see their investments perform more effectively than someone with more savings with a better-constructed portfolio.
But the contribution amount certainly matters: As Americans live longer, their retirement savings are starting to stretch thin, and some experts have suggested that Americans should stay in the workforce longer than they have to make sure they have sufficient income later in life.
This article was licensed through Dow Jones Direct.
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