Gender Investing Gap

If a $100 bill was dropping out of a hole in your pocket every day, you’d stitch it up immediately, right?

That daily loss is comparable to the gender investing gap, which directly affects women’s tendency to hold their money in savings accounts rather than investing it.

“Research shows women keep the majority of their assets 71 percent, to be exact—in cash,” says Sallie Krawcheck, co-founder and CEO of Ellevest, an investment platform specifically designed for women based on how they manage their financial priorities. “Savings kept as cash can miss out on market gains earned over time and be susceptible to inflation.” According to Krawcheck, this missed opportunity can cost women hundreds of thousands, maybe millions, of dollars over the span of their lifetimes.

After a storied career in finance, including a stint as CEO of Merrill Lynch Wealth Management, Krawcheck created Ellevest to change an industry that historically has catered to men. She explains that most financial advisors are men serving male clients, and that women’s goals are different when it comes to investing. “For women, we know that it’s not about outperforming the market or simply having more money,” she says. “It’s identifying and reaching concrete goals like buying a home, having a child, or starting a business.”

Signals that wealth isn’t for women start at a young age. Krawcheck points to fashion magazines that encourage “frivolous spending,” and characters in the media who don’t have proper control over their finances. “Carrie Bradshaw bought so many pairs of shoes that she couldn’t buy a house,” she says. “We need to break through decades of socialization of the idea that money is not for us.”

So how do we begin to close this gap? Krawcheck advises that the first thing to do is pay off any debt with a high interest rate, such as credit cards and auto loans. Next, she says to build up an emergency fund: save three months’ worth of take-home pay, and ultimately grow that to six months. Once those two milestones are met, she encourages practicing the “50-30-20” rule. Fifty percent of your take-home pay goes to needs, 30 percent goes towards fun, and the remaining 20 percent goes to investing and retirement funds, or what she calls “grandma you.”

At the end of the day, just getting started investing your money be it in the stock market, a piece property, or a retirement account is the most important step you can take. “Make a habit out of investing, even if you don’t have any money,” she says. “Start with just one or two percent of your income. Your future self will thank you.”