Women earn less than men, live longer, and take themselves out of the workforce to be caregivers. They need a way for their money to grow on its own.
While women are investing in record numbers, even more women could be benefiting from it.
The sooner you start investing, the better off you’ll be.
A growing list of women have achieved superstar status in the world of finance. Some, like Geraldine Weiss in the 1970s and Abby Joseph Cohen in the 1990s, paved the way for today’s leaders, including Mellody Hobson, Cathie Wood, Sallie Krawcheck, and Transamerica Institute’s very own Catherine Collinson.
Women in business, like entrepreneurs Barbara Corcoran — the founder of Corcoran Group and a Shark Tank celebrity — and Sara Blakely, the founder of Spanx, whose company recently saw a $1.2 billion valuation,1 have also joined this elite group of female investors.
There’s a saying in the financial industry: “the best time to start investing is 20 years ago, the second-best time to start is today.”2March 8 is International Women’s Day, which means it’s the perfect day to talk about the reasons why more women should become investors and how to get started.
Why should women care about investing?
Besides the obvious potential for wealth and financial freedom, investing can provide a buffer against some of the challenges and realities that women face over the course of their lives. Some of the most common obstacles that directly impact their financial well-being include:
Women earn less than men.In 2020, women earned 84% of what men earned, according to a Pew Research Center analysis of median hourly earnings of both full- and part-time workers. Based on this estimate, it would take an extra 42 days of work for women to earn what men did in 2020.3
They take themselves out of the workforce to be caregivers.Millions of women provide essential care for their kids, aging spouses, parents, and other adults with disabilities. The pandemic has punctuated how much women are disproportionately affected by the demands of caregiving, including job loss.
A 2021 report from the National Women’s Law Center showed that a majority of pandemic-related job losses have been experienced by women. Since February 2020, the report notes, women in the United States have lost more than 5.4 million net jobs. Globally, women’s employment dropped by 4.2% between 2019 and 2020, compared with 3% for men, a 2021 policy brief from the International Labour Organization found.4
Women live longer than men. In the U.S., the average life expectancy for women is 81 years and for men it’s 76 years, according to the Centers for Disease Control and Prevention.5Globally, the average life expectancy was 75 years for females and 71 years for males, although depending on where in the world a person lives, the life expectancy can change dramatically.6
Given the hurdles that women must overcome to make money, it makes sense for them to put it to work for them through investment. As the founding president and CEO of the nonprofit Transamerica Institute and its Transamerica Center for Retirement Studies, Collinson has long been a vocal proponent of improving retirement security among women — and she couldn’t agree more.
“Although women face headwinds that make it more difficult to save, our research has identified action steps they can take to help improve their retirement prospects, ranging from getting savvier about investing to engaging in financial planning,” said Collinson.
Women are good at investing but lack confidence
As it turns out, women investors have a slight edge over men when it comes to long-term gains, a study recently found.7
On average, women’s investment returns were 0.4% higher than men’s, according to the study, which analyzed the annual performance of 5.2 million customer accounts from January 2011 to December 2020.7
There are a few potential reasons why women tend to broadly outperform men. The first is that they trade less, allowing them to ride out market lows and avoid extra fees. They also tend to invest more consistently, which means they aren’t trying to time the market.7
Meanwhile, data also revealed that many female investors lack confidence. In 2017, one survey showed that just 9 percent of women thought that they would outperform men as investors. In 2021, only 14 percent of women said they knew a lot about saving and investing and 33 percent felt confident making investment decisions.8
Regardless of women’s confidence levels, the reality is women are beginning to invest in significant numbers, with 67% of women now investing their savings in the stock market. This represented a significant 50% increase in the volume of female investors active in 2018.9
Start now: tips on becoming an investor
The goal of investing is to put your money to work in one or more types of investment vehicles in the hopes of growing your money over time to try to create a more financially secure future.10
Create a monthly zero-based budget. This is where your income minus expenses equals zero. You’re telling every dollar where to go. A budget is your plan for your money. If you don’t tell your money where to go, you’ll wonder where it went. Consider getting a free budgeting app to help you keep track.11
Decide how much you can invest. The sweet spot, according to experts, seems to be 15% of your pretax income. You should consider that number a benchmark because the reality is it depends on your end goal. Think about what matters to you and what you expect to get out of an investment.12
Understand your investment options.It’s important to understand each instrument and how much risk it carries. The most popular investments for those just starting out include stocks, bonds, and mutual funds.
Join a Women’s Investing Group. You don't need to start your journey into the investing world alone. Join a women’s investing group. These clubs can be very educational and informative. They can also be sources of support and help keep you from making mistakes out of stock-market fears. Incidentally, research shows that women-run investment clubs perform better than co-ed clubs and certainly better than all-male clubs.13
Getting more women on board to flex their financial muscle through investing
Getting as many women as possible to start investing should be everyone’s goal because they have a lot of financial power and will likely have even more in the coming years. In fact, by 2030, American women are expected to control much of the $30 trillion in financial assets that Baby Boomers will possess — a potential wealth transfer of such magnitude that it approaches the annual GDP of the U.S.14
How can you encourage more female investors? Start talking.
Let’s face it, talking about money can feel uncomfortable or off-limits. But it’s likely a risk worth taking because it can help you — and them — to become more informed about financial topics, create accountability for financial goals, or even just vent about something that’s causing stress.15
You can start by sharing sources of information you’ve found useful — like an interesting book you’ve read. One of our favorite resources is Women and Retirement, which features research, infographics, and a podcast from the Transamerica Institute.
The more we share our personal experiences with investing with female friends and family, the more likely other women will feel inspired and empowered to do the same.
Things to Consider:
International Women’s Day is a great time to consider becoming an investor to help create a more financially secure future.
Building a community of women investors can set you on the right path and provide support and advice you might not get otherwise.
Being transparent about your own investing journey is a great way to inspire other women to do the same.
1 “Spanx, The Shapewear Brand, Valued at $1.2 Billion in Blackstone Deal,” CNN, October 2021 2 "When Is The Best Time To Start Investing?" Lifetime, May 2021 3 "Gender Pay Gap in U.S. Held Steady In 2020," Pew Research Center, May 2021 4 "Millions of Women Have Left the Workforce. Psychology Can Help Bring Them Back," American Psychological Association, January 2022 5 "Why Do Women Tend to Outlive Men?" Live Science, July 2021 6 "Average Life Expectancy At Birth In 2021, By Continent And Gender," Statista, February 2022 7 “Women Get Better Returns On Their Investments Than Men — Here’s Why," CNBC, October 2021 8 "Women May Be Better Investors Than Men. Let Me Mansplain Why," The New York Times, October 2021 9 “The Rise Of Women In Investing: A Seismic Step Forward,” Nasdaq, November 2021 10 "How to Start Investing in Stocks: A Beginner’s Guide," Investopedia, February 2022 11 "The Financially Savvy Female: 3 Money Moves Every Woman Must Make," Gobankingrates, May 2021 12 "This Is How Much Of Your Income Should Go Toward Investing, According To Experts," CNBC, September, 2021 13 "Why You May Want to Start, Or Join, An Investment Club," Next Avenue, August 2021 14 "Women As The Next Wave Of Growth In US Wealth Management," Mckinsey, July 2020 15 "How to Talk About Money With Your Friends," The Balance, January 2022
Transamerica Resources, Inc. is an Aegon company and is affiliated with various companies which include, but are not limited to, insurance companies and broker dealers. Transamerica Resources, Inc. does not offer insurance products or securities. The information provided is for educational purposes only and should not be construed as insurance, securities, ERISA, tax, investment, legal, medical or financial advice or guidance. Please consult your personal independent professionals for answers to your specific questions.
About Transamerica Institute
Transamerica Institute® is a nonprofit, private foundation dedicated to identifying, researching, and educating the public about retirement security and the intersections of health and financial well-being. Transamerica Center for Retirement Studies®, an operating division of Transamerica Institute, conducts one of the largest and longest-running annual retirement surveys of its kind. Transamerica Institute is funded by contributions from Transamerica Life Insurance Company and its affiliates. The information provided here is for educational purposes only and should not be construed as insurance, securities, ERISA, tax, investment, legal, medical, or financial advice or guidance. Please consult independent professionals for answers to your specific questions. www.transamericainstitute.org
