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.