Plus, expert advice on how to start saving more.
Women struggle to get rich — and they might die trying.
By the time they reach retirement age, women may have accumulated up to $1,055,000 less than men when accounting for their lifelong pay gap, as well as common workplace interruptions like raising families or caring for a sick parent or spouse, a new study on women and financial wellness by Merrill Lynch and Age Wave has found. Meanwhile, women on average make 80 cents for every dollar a man earns.
The study surveyed 3,707 people — 2,638 women and 1,068 men — based on their earnings from ages 23 to 65. It found that women were leaving the workforce with less money than men mainly because of their family roles as primary caregivers, coupled with getting paid less for the same work when returning after taking a leave. One in three moms who returned to the workforce after caring for kids said they took on less-demanding work, which resulted in lower pay, while 21% said they were paid less for the same work that they did previously.
While men also make career sacrifices for family, they don’t tend to have the same financial consequences, the study found. For example, a woman could experience work interruptions like leaving the workforce to care for children in her 20s or 30s; caring for a parent in her 40s or 50s; and retiring two years earlier than planned in her early 60s to care for a spouse. Meanwhile, an average male counterpart had a more continuous work life. Forty-one percent of mothers said that being a working parent had made it harder to advance in their careers, versus 20% of fathers.
But when it comes to addressing money problems head on, women tend to not want to talk about it. Sixty-one percent of women polled would rather talk about their own death than money, the report found — an alarming statistic considering that while the typical retirement costs $738,000, only 9% of American women have $300,000 or more saved. What’s more, women are living longer than men — according to United Nations world data, women live on average 4.5 years longer than men — so they really need a nest egg.
“We need break the taboo about talking about money,” Edythe DeMarco, a managing director for Merrill Lynch, told Moneyish. “There’s a lot of anxiety that goes along with that conversation, particularly among women.”
Here are simple, mindful money tips to start saving more now:
Get confident about investing. The study found that while women are confident in financial tasks like paying bills and budgeting, they’re not exercising their full potential when it comes to investing: Only 52% of women said they were confident in managing investments, versus 68% of men. What’s more, millennial women were the least confident at 46%.
If you’re working for a company that has a 401k, Demarco suggests contributing the max amount, then challenging yourself to put 10% of your paycheck into a Roth IRA or regular savings account.
Budget better. Stop over-spending and start tracking how much you’re shelling out on living expenses like rent, utilities, cable and meals. Figure out how to allocate the remainder into needs, not wants. “Unless you’re going to win the lottery, no one is going to accumulate wealth,” DeMarco said. “Rule No. 1 is to live beneath your means.”
DeMarco says a rule of thumb is to aim for saving 10% of your salary. If you’re single, you should strive to have a year’s worth of savings to live off of in an emergency. If you’re really bad at saving, DeMarco suggests getting a “money mentor” — someone successful that you trust to help you manage your expenses wisely.
Monitor your credit card statement. Comb through your credit card statement and highlight unnecessary purchases — then try to avoid them for the next month. “If you can’t afford to pay off your credit card bill at the end of the month, you shouldn’t have splurged so much,” DeMarco said.
Plan ahead. While millennials tend to be prefer spending on experiences rather than saving for up for homes and tangible items, DeMarco said it’s important to think ahead and start saving for big purchases.
“Ask yourself, ‘Where do I want to be in five, 10 years from now?’ What is the lifestyle you want to have in retirement?” she said. “As much as we want to live in the moment, planning does involve being mindful about the future.”
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