Women’s Guide to Financial Success

Not too long ago, women didn’t have the legal right to take control of their own finances.

Before the Equal Credit Opportunity Act became law in in 1974, women were not able to apply on their own for credit. Until that same year, it was legal in parts of the country to discriminate on the basis of sex in housing.

And it was legal until 1978’s Pregnancy Discrimination Act for employers to discriminate against women for being pregnant or giving birth.

Until 1993, companies were not legally required to provide unpaid maternity and family leave. Even now, companies with fewer than 50 employees and workers who have been employed in their present jobs for less than two years are not covered by this requirement. These, along with other restrictions, mean that only about 60 percent of the workforce is eligible for legally required, unpaid family leave.

A Long Way to Economic Equality for Women

The struggle for women to achieve economic equality is historic. In American Revolutionary times, women were considered the property of their fathers or husbands. Rape of a woman was considered a violation of the father’s or husband’s property rights.

Back then, for the most part, women couldn’t own property, enter contracts or join professional organizations.

The right to vote didn’t come until 1920. In the first half of the 20th Century, women who worked were expected to leave their jobs to have children once they married. Women with jobs were viewed merely as temporary employees.

Things have changed quite a bit from those times. And yet, women still have some catching up to do in the 21st Century when it comes to economic equality and financial skills.

Women’s Economic Landmarks
Year	Landmark
1809	Women are allowed to write wills in Connecticut. This law was passed by the majority of states in the 1850s.
1839	Mississippi becomes the first state to grant women the right to own property in their own names with their husbands’ permission.
1848	New York Married Women’s Property Act becomes a model, giving married women the right to own property and keep their own wages. By 1900, every state will have adopted this law.
1862	The Homestead Act of 1862 allows heads of household to claim up to 160 acres of government land out west and use it as a family plot for $10. Because heads of household are not defined beyond the age requirement, women are included.
1872	Congress passes a law that grants women who work for the federal government equal pay for equal work. The law does not apply to private or state or local government workers.
1920	The 19th Amendment giving women the right to vote becomes part of the U.S. Constitution.
1920s	Every state — except Arizona, Florida, Louisiana and New Mexico — has a law allowing married women to keep their own property and wages.
1963	Congress passes the Equal Pay Act, requiring employers to pay men and women the same wage for the same job duties. The law also applies to race.
1964	The Civil Rights Act of 1964 bans employment discrimination on the basis of race and sex.
1974	Congress outlaws housing and credit discrimination on the basis of sex.
1978	The Pregnancy Discrimination Act bars employers from discriminating against workers for pregnancy or birth.
1993	The Family Leave and Medical Act requires some employers to provide unpaid leave to employees for qualified medical and family reasons.
2009	The Lilly Ledbetter Fair Pay Act allows victims of pay discrimination to file a government complaint within 180 days of their last paycheck, making it easier for women to challenge unequal pay by extending the statute of limitations.

Women’s Modern Economics

Today, women are the main money earners in more than 40 percent of American households. Women control more than half of personal wealth — more than $14 trillion — in the United States. According to a report from BMO Financial Group, women hold 52 percent of management, professional and related positions and own 30 percent of private businesses in the United States.

Women-owned businesses employ more than 7.8 million people. And women make up 46.8 percent of the workforce in the country, according to data from Pew Research Center.

Research has found that women are as confident as men about paying bills and budgeting. They lack that confidence, though, when it comes to managing investments, researchers say. They also tend to worry more about their economic futures and know less about how to become secure.

Women face a host of challenges unique to their sex. Single mothers and minorities are particularly vulnerable to wage inequality and the lack of federally funded programs to support them. According to IWPR, as of 2015, only 31 percent of single mothers over the age of 24 held a bachelor’s degree or higher, in contrast to their married counterparts, of which 54 percent had attained a college degree.

And study after study unearths grim statistics on the struggles women persistently face in the workplace and planning their financial future.

Women Earn Less than Half

Women’s wages grew 75 percent between 1970 and 2015, while men’s earnings grew by just 5 percent in that same time frame. Yet, today, more than half a century after the Equal Pay Act became law, women generally have significantly lower wages than men.

The Institute for Women’s Policy Research (IWPR) found in 2018 that women earn much less than previously thought, compared with men. A 15-year study by the institute concluded that women earn 49 cents for every dollar earned by men. Researchers who conducted the study said the gender wage gap has closed markedly since 1968, but that progress has slowed in the last 15 years.

“Much ink has been spilled debating whether the commonly cited measure of the wage gap — that women earn 80 cents for every dollar earned by a man — is an exaggeration due to occupational differences or so-called ‘women’s choices,’ but our analysis finds that we have actually been underestimating the extent of pay inequality in the labor market,” said IWPR president and report co-author Dr. Heidi Hartmann.

In another study, the IWPR found that women are eight times more likely than men to work for poverty-level paychecks, with 4.2 million women working under those conditions, compared with just 500,000 men.

The institute projected in 2017 that if current trends continue, women will not achieve equal pay until 2059.

Financial Literacy Deficit

Experts say lower levels of financial literacy have a negative effect on long-term financial well-being. Higher rates of financial literacy have a positive effect in areas including wealth accumulation and retirement planning.

The American College tested men and women on retirement literacy and found that while 35 percent of men could pass a 38-question quiz, only 17 percent of women could pass the same retirement literacy test.

“The results of this study reveal that women continue to require more financial education and increased planning,” said Jocelyn Wright, chair in Women and Financial Services and assistant professor of Women’s Studies.

“Throughout their lifetime women will face challenges that include longer life expectancy, lower income, increased need for long-term care, and they are more likely to experience widowhood. Our research shows that women do not adequately understand many of the retirement issues they face, which can lead to poor and improper planning.”

Using data from 2012 and 2015, researchers in another study reported that less than a third of working women demonstrated basic financial literacy, much lower than working men.

FINRA’s Investor Education Foundation found that while women consistently score lower than men in financial literacy, the gap is closing for millennials. “Across generations,” the FINRA report said, “women were less likely than men to report that they were offered financial education, and this is important because participating in financial education is associated with higher levels of financial literacy for both women and men.”

Yet another study pointed to some possible reasons for the deficit. Researchers reported that 70 percent of women in a survey said the financial services industry catered mainly to men. For example, retirement calculators don’t account for breaks from the workforce, which are more often taken by women.

Also, researchers reviewed 1,594 pages of editorial content in the March 2018 issues of the top 17 magazines for women. Out of that, they found a total of only 5 pages of personal finance information.

 Struggling with Debt

A study from the TIAA Institute found that women who retire early, are widowed, divorced or have children showed signs of short-term financial distress. That study found that 33 percent of working women can’t meet an unexpected expense of $2,000 within 30 days.

The 2017 study also found that many women felt they had too much debt, and “working women are not prepared for retirement: The majority do not plan for it, and two-thirds are worried about running out of money in retirement.”

The good news in the study was that between 2012 and 2015, there were significant increases in the rates of working women who had at least one credit card and those who had a retirement account. However, the dollar amounts of their financial investments fell 6 percent in that time.

Retirement Planning Challenges

Other research shows women nearing retirement are more worried than men about financial risks they may face in retirement, according to the LIMRA Secure Retirement Institute.

That research echoed another report that showed women were three times more likely than men to say they can’t afford to save for retirement.

An online LIMRA SRI survey of workers aged 50 and older found that women, on average, felt they were more likely than men to incur long-term care costs and health care costs, face increased taxes and have a reduction to their Social Security and Medicare benefits. Women also thought the impact of these risks would be more significant to their financial well-being in retirement.

Another LIMRA survey found that 46 percent of women were concerned about running out of money in retirement, compared to 35 percent of men who had that same worry.

Workforce Breaks Are Costly to Women

Women comprise 66 percent of primary caregivers in the United States. And when women become caretakers, they are much more likely to have to take less-demanding jobs than male caretakers.

Those women who must temporarily leave the workforce to become caretakers pay a steeper financial price than men when they leave their employment temporarily.

The IWPR found that the costs for women who temporarily leave the labor force are high and getting worse. For those women who took a year off, annual earnings were 39 percent lower than women who worked continuously for the 15 years between 2001 and 2015. Women’s paycheck reductions for time away from work are almost always greater than men’s.

These findings were echoed by another study by Merrill Lynch and Age Wave that found that the cumulative difference in earnings between a man who works full-time without taking breaks and a woman who takes breaks to care for family members can total more than $1 million.

The IWPR gave the following additional findings from its study:

• Improving paid leave and affordable child care is critical to narrowing the gender wage gap. Despite considerable progress over the last 50 years, 43 percent of today’s women workers had at least one year with no earnings, nearly twice the rate of men. Research has shown that such policies as paid family and medical leave and affordable child care can increase women’s labor force participation and encourage men to share more of the unpaid time spent on family care.
• Strengthening enforcement of equal employment opportunity policies and Title IX in education are crucial to narrowing gender wage differences. Stepped-up enforcement will enable more women to enter occupations that pay better, but currently these careers are often off-limits to women, despite decades of progress.

Financial Literacy Resources and Tips

If you want to improve your financial knowledge, online resources are available to you.

• The Women’s Institute for Financial Education (WIFE) calls itself the oldest nonprofit dedicated to providing financial education to women to help them become financially independent.
• Women’s Institute for A Secure Retirement (WISER) says its mission is to educate and advocate for the long-term quality of life for women. The nonprofit also supports women in securing adequate retirement income.
• Savvy Ladies is a nonprofit that helps women identify their goals and make proactive choices about finances so they can have more rewarding lives. It offers webinars, seminars and a free helpline.

In addition, the BMO report offered the following recommendations for achieving financial security:

• Have a risk management plan: Insurance policies for disability, long-term care, and health are all important for facing unforeseen health issues. In addition, you should have an emergency fund to cover unexpected crises. If you have forms of income other than your monthly household income, such as payments from a structured settlement, disability, alimony contract or investments, budget that money wisely. If you need assistance, talk to a certified financial planner.
• Save for important goals: Tax advantaged savings can help you reach your goals faster. For example, invest through company sponsored 401(k) plans, which reduce the amount of income subject to income tax by making payroll deductions. Self-employed professionals can look into contributing to a Solo 401(k), Traditional IRA or Roth IRA plan.
• Plan for your legacy: Talk with your family members and other loved ones to establish how you will be remembered and ensure that your financial assets, as well as your family values, are passed on. Teach your children about financial management and responsibility from an early age.