gender wealth gap, women, investing

Women and Investing: The Gender Wealth Gap Nobody Talks About

You’ve probably heard the stats about the gender pay gap in America: Women today earn $0.81 for every dollar that men do—which, over the course of a career, can means hundreds of thousands of lost wages.

Here at SoFi, we want to do everything we can to help you attain everything you’re entitled to. Sometimes, that means researching your market value and asking your employer for more. Other times, it might mean looking for a new role, with higher pay and more opportunity for advancement.

But there’s something else you can do to close the gender wage gap—something that might be even more powerful.

Yes, women today earn less than men, but according to a recent SoFi study, they’re also investing their earnings less—which means they’re missing out on the opportunity to grow their wealth on a much larger scale.

By considering investing your money, you have the potential to make progress on longer-term financial goals like buying a home, starting a business, or retirement. Keep in mind that all investing comes with risk.

The Gap between How Men and Women Invest

SoFi’s data insights research from 2017 shows that women typically have an acute understanding of their finances. They know how much they owe and how to repay it—and they do it faster than their male counterparts. Women pay around $200 more per month on their loans, and end up paying them off nearly four months ahead of men.

Studies also show that women are committed to building the skills they need to thrive in their careers. On average, women invest more than men in education: in a separate 2016 report by Council of Graduate Schools found women were earning almost two-thirds of graduate degrees and half of the masters’ and doctorates at the schools surveyed.

But when it comes to investing their money, women fall behind. Here are just a few eye-opening statistics based on a current analysis of over 10,000 SoFi Invest accounts.1

Other Gender Differences in Financial Behavior

Men invest 6.6% of their income, while women contribute 5.4%.

While women earn less than men, investing a smaller percentage of their income can hurt their ability to meet long-term financial goals.

On average of those who have recurring deposits, men contribute 48% more than women.

More men than women regularly contribute to their savings goals before spending money elsewhere.

Men contribute 32% more than women.

When controlling for income, and looking at people making $50-$200K per year, men contribute one-third more than women.

53% of men choose the most aggressive investment plan, compared to 38% of women.

SoFi financial advisors often recommend choosing an aggressive investment plan for a long-term goal like retirement.

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How to close the investment gap

Just like there are steps you can take on a personal level to close the gender pay gap (like understanding your worth and asking for more), there are simple steps to get started on an investment strategy. Alison Norris, Certified Financial Planner and Advice Strategist at SoFi, recommends starting here:

1. Plan with a purpose

Crafting an investment plan shouldn’t start with imitating what your friends or industry experts are doing—it should begin with your goals for yourself and your family.

Related: Examining Male vs. Female Investment Behavior

“Take a look at what you want to accomplish in life,” Norris recommends. That could mean buying a home, starting a family, taking a sabbatical from work, or retiring early. Those goals will help you determine the right investment strategy.

“The time horizon you have for your goals—how long you have until you achieve them—is one of the main things that should determine how you should invest,” explains Norris. “If you have a long time to save and invest for a goal, you can be more aggressive. If your goal is right around the corner, you should be more conservative.”

2. Commit to saving

According to Norris, retirement should always be part of your savings plan. “It’s tempting to de-prioritize that goal and pursue near-term goals like buying a home, but I’d discourage that,” she says. Industry best practices recommend saving 15% of your annual income for retirement and taking advantage of a 401(k) match if it’s available to you.

“If 15% is too much right now, save what you can and commit to increasing the percentage you contribute at regular intervals,” explains Norris, “like when you get a bonus or a raise.”

That doesn’t mean retirement should be the only element of your financial plan. “It’s important to know all of your goals,” says Norris. Once you’re able to fund your retirement, you should look into investment accounts that can help you work toward your other goals. Want to know if you are on track for retirement? Use our retirement calculator to find out!

3. Diversify your investments

2013 research shows that women are more risk averse than men, but that doesn’t have to hold you back from investing. A diversified portfolio spreads out your money across thousands of different investment types, rather than hinging your entire account balance on a couple of individual stocks, which could help smooth out some risk.

You’ll also want to consider the level of risk you’re comfortable taking on. Often, depending on your unique financial circumstances, a safe bet might be a more aggressive strategy than you think.

“We typically recommend you invest in the least aggressive portfolio that will help you meet your needs,” says Norris. “But ironically, that can mean an aggressive allocation, because if you’re too conservative, your returns may not keep pace with inflation.”

The key is to expect that the market will fluctuate and stay the course, no matter what. “You have to tell yourself—in good times, before you even see those dips—that they’re going to happen,” Norris explains.

4. Check in annually

Your investment strategy shouldn’t be something you set once and forget. Check in on a regular basis—Norris recommend just once per year to avoid worrying about market ups and downs—to make sure you have a solid understanding of what you own, what you owe, and the status of your accounts.

That yearly check-in gives you the opportunity to make adjustments to make sure you’re on track to reach your goals.

“If you want to buy a home in ten years, you might want to be very aggressive today, but nine years down the road, you’ll probably want to have the account in all cash,” Norris explains. Changing your allocations over time will help you ensure you have the money you need to meet your financial goals on your timeline.

5. Trust that you’re naturally equipped to be a smart investor

“When women commit to investing, they achieve greater results than their male counterparts,” Norris says.

Data backs that up: A recent investments study revealed that when women invest, they outperform men with investment by 40 basis points, or 0.4 percent. What’s more, men are more likely to trade their stock investments than women, which can be a risky approach. As Jean Young, senior research analyst at Vanguard explains in a 2015 Wall Street Journal article, by trading less often, women are less likely to trade at the wrong time.

“When you view yourself as a capable investor—not trying to outsmart the market, but leveraging the market to work toward your goals—you can achieve great results,” Norris adds.

Working toward equal, fair pay between the genders is critical—but just as important is the potential of growing those dollars through a smart investment strategy.

SoFi wants to help. Which is why, in support of this year’s Equal Pay Day, we’re offering a dollar match (up to $200) for those who open and fund SoFi Invest accounts2, individual or joint taxable account, through this link.

Best of all, your Invest account comes with unlimited access to SoFi Wealth, LLC financial advisors, who can help you identify your goals, plan a smart strategy, and answer any questions you have along the way.

Click here for the offer

1 SoFi does not collect information on applicants’ gender. Gender classifications are part of SoFi’s proprietary machine learning model that predicts demographic information. The objective is to better understand our customers’ financial journey, anticipate their potential needs, and better serve our customers. The data analyzed over 10,000 funded investment account in SoFi Invest, as of Feb. 2018.

2 Limited time offer, end 04/16/18. Terms and conditions apply. To receive the offer, you must: open and fund a new SoFi Invest LLC individual or joint taxable account through the signup URL above, IRA accounts are not eligible for this offer. The offer applies to new accounts only. The offer is limited to one per person and a maximum matching dollar for dollar amount of up to $200. The offer expires on 04/16/2018 at 5pm EST. Once conditions are met and account has been opened and funded, you will receive deposit within 10 business days.

Bonus amounts of $600 or greater in a single calendar year may be reported to the Internal Revenue Service (IRS) as miscellaneous income to the recipient on Form 1099-MISC in the year received by applicable law. Recipient is responsible for any applicable federal, state or local taxes associated with receiving the bonus offer, consult your tax advisor to determine applicable tax consequences. SoFi reserves the right to change or terminate the offer at any time or without notice. Please refer to Form ADV Part II for additional disclosure information regarding related parties.

SoFi Wealth, LLC does not render tax or legal advice. Individual circumstances are unique and we recommend that you consult with a qualified tax advisor for your specific needs.

The SoFi Wealth platform is operated and maintained by SoFi Wealth LLC, an SEC Registered Investment Advisor. Brokerage services are provided to clients of SoFi Wealth LLC by SoFi Securities LLC, an affiliated broker-dealer registered with the Securities and Exchange Commission and a member of FINRA / SIPC. Investments are not FDIC Insured, have No Guarantee and May Lose Value. Investing in securities involves risks, and there is always the potential of losing money when you invest in securities. Clearing and custody of all securities are provided by APEX Clearing Corporation.

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