Investing can sometimes be challenging for women due to a variety of factors, although it's important to note that these challenges are not universal and may vary depending on individual circumstances and location. For the most part though, we have found that women have a harder time parting with that investment dollar than men do, and with taking that first step. This hesitation has severely harmed women, and continues to do so. There are some reasons why women may face difficulties when it comes to investing, and we offer ways for women to overcome those.
Why is it so hard for women to start investing?
There are a number of reasons why women face challenges when starting to invest. These include:
Gender pay gap:
The gender pay gap refers to the disparity in earnings between men and women. Women, on average, tend to earn less than men for various reasons, including occupational segregation, discrimination, and work-life balance considerations. This wage gap affects women's ability to accumulate savings and investment capital, making it more challenging for them to engage in long-term investing. Though there is widespread recognition of the gender pay gap, it still persists, with women earning $0.77 to every dollar for a white male even in 2023.
Our founder saw this firsthand during her time on Wall Street as it was clear that men in the financial industry were being paid more than women.
Investment knowledge and confidence:
Research has consistently shown that women tend to have lower levels of financial literacy and confidence in investing compared to men. This can be attributed to several factors, including differences in education, societal expectations, and cultural norms. Limited knowledge about financial markets, investment products, and investment strategies can make it daunting for women to start investing or make informed decisions. That is why it is so important for women in particular, to take the initiative to become smarter about finance and investing. See “Women Must Invest” and “Women Have Unique Financial Issues vs. Men.”
Gender bias and stereotypes:
Gender biases and stereotypes continue to persist in various aspects of society, including the financial industry. See “Gender Bias in the Investment Industry”. There is a long-standing perception that investing and finance are predominantly male domains, which can create a sense of exclusion for women. See “Why are Investing Terms So Scary?” These biases can manifest in subtle ways, such as financial advisors or industry experts being less likely to engage or communicate effectively with women investors, or to be able to understand their needs. Such biases can limit women’s access to investment opportunities, hinder their ability to build networks, and impede their confidence in making investment decisions.
Risk aversion:
Investing involves a certain amount of risk. Women are often portrayed as more risk-averse investors compared to men. While being cautious and risk-aware can be beneficial, excessive risk aversion may lead to missed investment opportunities and potentially lower returns. Research suggests that women's risk aversion can be influenced by various factors, including financial obligations, personal circumstances, and societal expectations. See “Invest like a River, not a Lake”. Overcoming this perception and developing a balanced approach to risk-taking, as well as becoming more knowledgeable and confident about investing, can empower women to engage more actively in investing.
Lack of representation in the financial industry:
Women remain underrepresented in key positions within the financial industry, including investment management, financial advising, and leadership roles. The lack of diversity in the industry can create a sense of alienation and make it harder for women to find relatable role models, mentors, and advocates. Increasing the representation of women in the financial industry can lead to a more inclusive and supportive environment that encourages and empowers women to invest.
In summary,
Clearly, there are hurdles that women face before they start to invest. But many of these hurdles can be overcome, with the proper knowledge and confidence. Being able to ask questions, get answers and understand the power of investing is critical for women.
Addressing these challenges will take time and requires concerted efforts from various stakeholders, including financial institutions, educational institutions, policymakers, and society as a whole. Promoting financial literacy, providing accessible investment education, challenging gender biases, and fostering inclusive environments are essential steps towards enabling women to overcome barriers and participate more actively in investing.
That is why we exist. To help you overcome these hurdles and start to take control of your financial future today. I always like to think about the Fearless Girl. It is never too late to start, but just start.
“Money is the opposite of the weather.
Nobody talks about it, but everybody does something about it.”
— Rebecca Johnson
Key: Why Is it So Hard for Women to Start Investing?
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Nothing in this email is intended to serve as financial or investment advice and you should do your own research and consult with appropriate advisors.