4 reasons women are losing the financial race to men

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I’m someone people can go to for financial advice. I went to business school, have a master’s degree in accounting, and work in a Big 4 Public Accounting firm auditing multinational banks. But when I wanted to start my own self-directed investment account, I asked a male friend who had dropped out of my undergraduate program how to do it.

I didn’t analyze the reasoning behind my actions back then, but if I had, I would have seen that it stemmed from a deep-seated fear of doing something financially wrong. I had been educated in a liberal institution, but some part of me believed I didn’t know what I was doing, I would never know what I was doing, and I needed to play it safe until a man figured it out for me.

Men nearing retirement age have an average of $118.4k set aside for long term goals, while women only have $81.3k. The numbers don’t lie: women are losing the financial race to men. But why?

Reason 1: The wage gap

This is the first reason that will come to most people’s minds. In Canada, women workers earn an average of 75 cents for every dollar earned by men.

Reason 2: Women spend more?

This actually isn’t true. Men spend an average of $35k per year to women’s $33.7k. Although women tend to spend more on clothes, men tend to spend more on food, so this mostly evens out.

Reason 3: Women live longer

The average male life expectancy is 73.4 years while the female life expectancy is 80.1 years. This means women have 6.7 more years they have to pay for with their retirement savings… but they have $37.1k less than men do in their retirement accounts.

Reason 4: Women don’t invest

Statistics show that women on average invest 40% less than men. With lower earnings and a longer lifespan, if women don’t invest, the wage gap is compounded dramatically. But why don’t women invest?

One is a lower risk tolerance. Since women are more likely to have uncertain income due to lower net worth, and years taken off for childcare, women tend to be more cautious in investing, and will tend to invest in bonds, which yield lower returns, than stocks. In this case, it’s important to remember when you’re investing that these funds are usually earmarked for retirement rather than for a quick buck to spend. If you’re in your 20s and saving for retirement, it’s ok to invest in riskier stocks because they average a higher return; as you enter your 60s you may want to transfer these stocks to bonds so that you can lower your risk and make sure the value of your investments are there when you need them.

Besides our shift in mindset regarding our risk tolerance, the much bigger issue is what I hinted towards at the beginning of this post: women lack the same confidence as men when it comes to investing.

While women tend to consistently earn higher returns than men when they do invest, less of them are confident in doing so. Even my male friends who are not in the business sector will brag about their stock returns. A female friend once asked me, after laughing self-consciously: “Could you explain what a stock is?”

Wall Street bankers are usually assumed to have a male persona, while the association of women and money is usually around the penny-pinching practice of saving for a rainy day. Men make the big moves, and women clean up any messes. But we cannot play into this stereotype lest we want it to become a self-fulfilling prophecy.

It’s not enough to budget, put your money in a savings account, or with an investment manager and expect them to handle it all behind a black curtain. While there are tons of systemic reasons why women are losing the financial race to men, our lack of investing is one we can directly control, and we should be making big moves to equalize that part of the playing field. The topic of this blog post was one of the inspirations behind this blog – as an active participant in the business world, I want to make business knowledge more accessible and appetizing to the wider female audience. Let me know what questions you have about money, and let’s race together.