More Than Half of All Women Are Making a Major Money Mistake

Are you one of them?

Christy Bieber
Christy Bieber
Mar 16, 2019 at 9:20AM
Investment Planning

When it comes to money management, women are excelling in many different ways, including taking charge of their financial futures. In fact, Fidelity found close to three-quarters of women surveyed in their 2018 Fidelity Women and Investing Study had plans to make their money work harder within the next six months.

Unfortunately, there's one very important area where women are falling short: investing. While there are many reasons for women's reluctance to put their money into the market, failing to figure out how to become an active investor can cost women the opportunity to build real wealth.

The good news is, there are simple ways to get started in investing, and you don't have to be a stock market guru to get your money into the market.

Women looking at financial papers with calculator.

Image source: Getty Images.

Women are making big mistakes when it comes to investing

According to Fidelity, just 44% of women put non-retirement savings into investment accounts. That means more than half of all women -- 56% -- aren't putting money into the market. Among men, on the other hand, 59% invest non-retirement savings in the market.

Women tend to prefer to keep their savings in cash or bank accounts, Fidelity found. While that's fine for an emergency fund, many women are leaving substantial amounts of non-emergency savings in bank accounts that average less than 1% return on investment.

This includes a third of women surveyed who have at least $50,000 of non-retirement and non-emergency savings sitting in a savings account. This is a lot of money to leave languishing in an account that does almost nothing to help you grow your wealth.

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Why aren't women investing?

The reasons why so many women don't invest aren't surprising. Many don't understand how to get started or what to put their money into.

In fact, just 1 in 4 women surveyed said they're comfortable with their investing knowledge, and only 44% said they'd know what steps to take to get started if given $25,000 to invest today.

Additionally, the majority of women -- 65% -- indicated they need to learn more about how to select individual stocks before they can start investing their money in the market. 


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What are women losing by not investing?

While fear of investing is understandable, the fact is that not investing should be a scary prospect, too.

If you don't put your money into the market but instead leave it to earn just 1% or 2% interest in a high-yield savings account, you give up thousands of dollars in potential returns. 

Say you have that $50,000 balance around one-third of the women responding to the Fidelity survey had sitting in savings. If it's invested over 10 years in a high-yield savings account earning 2% (which is pretty generous for a savings account), you'd end up with about $60,960 at the end of the decade -- a gain of just $10,960. 

But, if you put the $50,000 in the market and earned 7% returns, which is a pretty reasonable return, you'd have about $98,371. You'd have earned $48,371! That's $37,411 more than if you'd left your cash to sit in savings. Losing almost $40,000 because you're afraid to put your money in the market is definitely not a good financial move. 

How can you get started investing?

The good news is you don't need a huge amount of expertise to put your money into the market. There are several different options to invest that offer valuable guidance and do much of the grunt work of investing for you.

One solution is to use a robo-advisor, such as Wealthfront or Betterment. These accounts ask you some questions about investing goals and your timeline for using the money. Then, they invest for you. The robo-advisor builds a diversified portfolio and takes steps to keep tax costs of investing down. The benefit of a robo-advisor is you really don't need to know anything, but the downside is that you have to pay a fee for the advising service. 

A better solution for many women is to simply buy a few ETFs to build a diversified portfolio on your own. ETFs, or exchange-traded funds, are baskets of securities that give you exposure to a wide range of asset classes. Many track specific market indexes, such as ETFs that track the Dow Jones Industrial Average.

If you pick a few ETFs that track different segments of the market or that give you exposure to different kinds of assets, building a diversified portfolio is simple and easy. You can find a number of suggestions online for ETFs that can make a complete portfolio, so you could just pick one of these model portfolios to make the process even simpler. 

Don't let fear prevent you from earning the returns you deserve

If you're one of the majority of women who doesn't invest outside your retirement account, now is the time to think seriously about making your savings work for you.

Just get your money into a robo-advisor or open a brokerage account and pick a few ETFs to invest in, and you'll be setting yourself up for far greater success than if you leave your money to sit in a savings account that barely keeps pace with inflation.