No matter how much women prefer to lean, to be protected and supported, nor how much men prefer to have them do so, they must make the voyage of life alone, and for safety in an emergency they must know something of the laws of navigation.
Elizabeth Cady Stanton, 1892
These words were
uttered by one of America’s most prominent women’s rights leaders almost 130
years ago. Yet they are as appropriate
in 2021 as they were during the late 19th century. Lack of financial
savvy can put women (and men) at a substantial disadvantage in navigating both
everyday financial decisions and occasional big ones.
Statistics tell us
that it is only a matter of time before most (85% to 90%) women will be on
their own financially. Some will never
marry, some will see their marriages end in divorce, and many will outlive
their husbands.
Women have unique
financial needs for the following reasons:
Ø
They
live longer than men, on average, so their money has to last longer.
Ø
They
earn less, on average, than men do.
Ø
They
may have gaps in their employment history that will impact future retirement
benefits.
Ø
They
are impacted more severely than most men are by events like widowhood and
divorce.
Ø
Some
married risk becoming a “displaced homemaker” if the relationship ends (e.g.,
death and divorce).
Ø
Some
women lack financial experience because they were taught “the man is supposed
to handle the money.”
I learned in a
recent Next Gen Personal Finance webinar that the un-controlled gender pay gap
is 82% (i.e., on average, women earn 82 cents for every dollar men do) and the
controlled pay gap (using data for men and women with the same job and
qualifications) is 98%. There are smaller gender gaps for younger than older
workers as gender gaps are “career progressive” and widen over time with job
level and age. There are also smaller gaps where salaries are fixed (e.g.,
salary schedules and union contracts) via those where managers have some
latitude.
While a 2% pay gap
does not sound like a big deal, it is. Invested at a 7% return over a career,
it can add up to almost $200,000! COVID-19 has exacerbated gender pay gaps as
women were more likely to work in affected industries and to care for children
schooling at home. As we have seen, people’s
work lives and home lives are intertwined. Almost 2 million women who dropped out of the labor
force since April 2020 have not yet returned.
A key take-away
from the NGPF webinar was the need to teach women how to negotiate a starting
salary and promote themselves. Otherwise, they will be forever behind because
future percentage raises (e.g., 4%) will be based on a lower initial starting
point. The following three tips were suggested for women to overcome pay gaps:
¨
Talk
About Salaries and Careers-
Discuss salaries, jobs, and money with co-workers in a casual, general way. As
you get more comfortable talking about finances, consider asking peers,
especially males, what they make, even if it makes you uncomfortable. Use the
“under/over” method described below to “soften” the ask.
¨
Avoid
Exact Dollar Amounts- Avoid
sounding too direct and off-putting by asking people to divulge their exact
salary amount. Instead, ask questions like “Do you make over $X?” or “Do you
make under $Y?” A recent article described a young female worker who
significantly increased her pay by using this approach.
¨
Practice
Negotiation Skills- Develop and
rehearse a “script” that focuses on your education, skills, and recent
accomplishments. Emphasize how you can add value to an employer and help it to
accomplish its mission. Role play negotiations with family or friends to
practice making proposals and counter-proposals.
A more
contemporary twist on Ms. Stanton’s quote is “If it is to be, it is up to
me.” Today is the first day of the rest
of your financial life. Make the most of
it. Learn one new thing every day about personal finance and never consider
your financial education finished.
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