Why Aren’t Women Investing? The Gender Investment Gap

[social_warfare]

The gender wage gap has long since grabbed headlines, more recently a new gap is capturing attention.

This is the gender investment gap.

The gap shows women are investing 40 percent less than their male peers.

So why is this so?

I actually flip this dry statistic around. It shows that women are investing and taking an interest in it. It is actually hugely encouraging for all women. Even the ones who are interested but not taken the plunge yet.

Where We Came From

Let’s look at how things were for women just 1 or 2 generations ago.  It wasn’t until the 1970s before women could open credit accounts on their own.  While women could open up individual bank accounts, it wasn’t that common. Just like it wasn’t uncommon for women not to finish college – it just wasn’t seen as important at that time.

We know that women started entering the workforce en mass during the Second World War. Previous to that, women worked on the farm or within the house, so having separate bank accounts didn’t seem like a necessity.

Most women got the message that it was more important to focus on getting married and raising a family.  Included in this message is that money, how to make it, how to manage it, was men’s focus.  We had very delineated and rigid roles that have only recently been challenged.

Mind the Gaps

Lingo

When it comes to investing it is like learning a new language.  Finance is full of lingo, jargon, fancy acronyms (PIIGS, FAANG, TINA?… WTF?).  And for many generations, no one bothered to speak to women in this language, so we didn’t learn it. (Many men probably haven’t learned this language either, it’s just assumed they have).

Would you learn Latin if you knew you’d never use it? Probably not, you’d put your time on learning something you could use every day.

Black Boxes

A lot of women don’t feel confident in investing because we don’t understand this world.  Everyday women don’t get to see the inner workings of finance.  We haven’t been made to learn the theory or the formulas. So investing blindly feels like gambling to us. When you don’t know what you are putting your money into, it is gambling.

Instead, society categorizes women as ‘risk-averse’.

In my opinion, it’s a harsh label.  Society expects women to sprint before learning how to walk.

Where is the Confidence Gap?

Most experts, when asked, they point to women’s lack of confidence in investing as the major roadblock.  Like somehow we can just buck up, that we are the only thing holding us back.  If we could just get out of our own way, essentially.

That’s looking at this in a very narrow perspective and in a vacuum.  Which, of course, is not the way we live.  We live messy lives where one thing bleeds into another.  And yes, women are less confident in certain areas – I think women are less confident that if they lose a dollar, they can make it back as easily as men might be able to.

And isn’t the age-old advice; don’t invest what you can’t afford to lose?

Insecurities

Again, looking at history, we’ve only been making our own money for a relatively short time compared all of human history.  We certainly don’t make as much as men do in certain domains.  We have the motherhood tax that men simply don’t face due to the fact that they cannot bear children.

We feel this insecurity.  Not from an emotional perspective but a psychological one.  A bit extreme, but I relate it to food insecure homes where sometimes the next meal is not guaranteed.  In those homes, you wouldn’t expect a lot of excess food going to waste.  They don’t risk what they have on unknowns.  They think more about preventing today or tomorrow’s hunger than they do about what’s going to happen 10 years from now.

Under these constant pressures, we simply don’t have the bandwidth to anticipate and prepare for things that might happen in some distant future.

Despite all of these headwinds, society expects women to have also mastered finance by now.  They treat this confidence gap at the individual level – who’s got it, who doesn’t.  Or perhaps they may look upon it as a women’s problem.  Few see it as a systematic issue.

It’s no wonder we feel so much shame around money.

Next Stop

It blows my mind to think about it sometimes, but my mom didn’t have her own separate bank account or her own credit card until she was 41.   Her set up was not unlike my grandmothers’. Yet, I would never say my mom was bad with money.  She was a woman of her times.

During these generations, women like my mom and grandmother had a lot of practice in the language of budgeting and saving.  My friend told me that her dad made the money and gave a “household” allowance to her mom.  With that allowance, it was up to her to budget for the running of the household.  My mom began her marriage under a similar setup.

Maybe yours did too.

Now marriages are different and not so hierarchical.  We share responsibility for investing & Finances. Or we are postponing or forgoing marriage, so this responsibility lands solely on us.  This is still kinda new.  We are the first generation to really have to negotiate this path and we are still feeling it out.

So when I look at our history, we’ve not been at the investing game that long and we’ve been quick studies.

We should not be looking at women investing less than men, but we should be celebrating just how many women are investing and learning this new language.  These women are furthering the path that our mothers started us on.

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