It's Women's History Month. Here's How Gender Impacts Investing

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  • Women, on average, are less likely to invest than men.
  • Women make less than men and therefore have less to invest, but there are also systemic issues at play.
  • While there are certainly larger solutions needed, individually, I encourage women to at least participate in their workplace retirement accounts.

Anything you can do, I can do -- and I can do it in heels.

The U.S. -- and, let's be honest, a good chunk of the rest of the world -- has a serious problem with inequality. And one place it's felt particularly strongly is in the world of finance.

We've talked for decades now about the gender pay gap. For as long as women have been a part of the U.S. workforce, they have been paid less than men for the same jobs and skills.

But that's not the only place gender makes an impact on finances. It turns out there's also a massive gender gap when it comes to investing. And it's costing U.S. women billions.

Yet another side-effect of the pay gap

There are a variety of factors that may be contributing to the gender gap in investing. The most obvious, of course, is the pay gap itself. 

Women, on average, simply don't bring home as much money as their male counterparts. As a result, they have less discretionary income to use for saving and investing. While there has been infinitesimal improvement in certain fields and age brackets, on the whole, the pay gap has remained nearly the same for the last 20 years.

And that income gap makes a big difference. A study by investing research company Morningstar found that, when it accounted for income, the investment gap narrowed considerably. There are simply more men than women in the higher income brackets, giving them an investment advantage.

Lack of time and confidence aren't helping

However, while significant, the pay gap isn't the only problem. No, there are also systemic and cultural issues that leave women with less time to invest, less confidence in their investing skills, and a much lower tolerance for risk.

For one thing, women are significantly more likely to be the caregiver in the home. This means they're also more likely to need to sacrifice their careers -- and, thus, their incomes -- to deal with familial responsibilities.

Those responsibilities also mean women have much less free time to spend on things like investing, or learning about finance in general. Less knowledge means less confidence. 

For example, a study by BNY Mellon showed that nearly a third of women are turned off from investing more due to the overly complicated language used by financial professionals. And as many as 45% of surveyed women believe the stock market is simply too risky (an opinion that tends to diminish as investing know-how increases). 

Inclusion is also a big problem

Another potentially major factor in the investment gap is that the investing industry simply isn't that open to women. The majority of stock brokers and financial advisors are men -- only 35% of financial advisors in the U.S. are women. 

What's more, those men are more often than not looking to help other men. According to one survey of asset managers, 86% said they specifically target men, not women.

While the obvious answer, to this part of the problem at least, is to encourage more women to enter into financial roles, well, that issue is…complicated. Women entering male-dominated fields are often subject to, let's say, less-than-favorable conditions. But that's not the half of it.

No, the unfortunate reality is that it starts all the way back in grade school. Countless studies have shown that there exist systemic issues with how we teach math and science -- coupled with our cultural biases on gender and logic-based skills -- that push women away from these fields in the first place.

Bridging the gap

In the end, there are no easy answers to filling these gender-based gaps. It's obvious the problems are widespread and deeply rooted. But something needs to be done. Women, who already live longer than men on average, are struggling in retirement.

At the very least, we need to properly educate and encourage women to be involved in their workplace retirement accounts. Most full-time employers offer tax-friendly retirement plans, be it a 401(k) or IRA account, that can be automatically funded through paycheck withdrawals. 

What's more, many companies will match your own contributions to a certain point. For instance, if your company offers a 5% match, that typically means it’ll match your retirement contributions up to 5% of your salary. This is essentially free money going to waste if you aren't using it.

I also personally encourage all women readers to find a few strong financial role models. Maybe this means picking up a Suze Orman or Jean Chatzky book. Maybe it means listening to weekly podcasts like So Money, hosted by Farnoosh Torabi, or Afford Anything, with Paula Pant. Maybe it's even someone in your own life with skills they're happy to share, such as a coworker or friend.

Whatever the case, make the choice to take charge of your financial future. Close your own investment gap by gaining the knowledge to succeed.

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