Key findings
- On average, women earn 82% of what men earn in the U.S. Other studies have shown that the wage gap is even larger for women of color.
- The motherhood penalty and a tendency to have lower credit scores on average also make it more difficult for women to build wealth.
- Women live 5.8 years longer on average than men in the U.S., so they need to save more for retirement.
Obstacles women face to building wealth
While it’s certainly possible for women to build wealth — and indeed, many women who have successfully done so — there are several societal factors that make it harder for them.
“Women are often at a disadvantage in the financial sector,” says Dr. Olivia S. Mitchell, professor of insurance/risk management and business economics/policy at the Wharton School of the University of Pennsylvania. “Around the world, they tend to earn less, take time away from work to raise children and are found in occupations and industries which are less likely to offer access to retirement savings plans.”
Here are some of the unique obstacles women face when it comes to building wealth:
The Wage Gap
One of the biggest barriers women face in building wealth is the gender wage gap. In 2022, the median wage of all female full-time, year-round workers was 82% of the median wage of all male full-time, year-round workers. In other words, the average woman earned only 82 cents for every dollar the average man did.
Moreover, the wage gap was more pronounced in certain high-earning industries, such as the legal industry — where the median female wage was only 53.5% of the median male wage.
Education also affected the gap. The median earnings of women with less than a high school degree was 66% of the earnings of a male at the same education level, while a woman who was a high school graduate or equivalent made 70.1% of what her male counterparts did.
“This gap is often rooted in systemic issues like occupational segregation, gender bias in the workplace, and the undervaluing of roles traditionally held by women,” says Ting Levy, Ph.D., senior instructor of economics and a Division of Research associate in the College of Business at Florida Atlantic University. “Over a lifetime, this gap can lead to significantly less income, affecting savings, investments, and retirement funds.”
Although the MarketWatch Guides analysis did not look at racial differences in the wage gap, a 2021 study by the Center for American Progress found that the wage gap was more pronounced for some women of color. For every dollar the average White, non-Hispanic man earned in 2020, a white, non-Hispanic woman earned 79 cents, a Black woman earned 64 cents and a Hispanic woman earned 57 cents.
The U.S. has made significant progress in closing the wage gap since 1960, when the median female wage was only 60.7% of the median male wage. But it’s not enough, when lower wages impact almost every aspect of a woman’s finances — giving her less money to invest, less ability to pay back debts and lower Social Security benefits in retirement.
The Motherhood Penalty
Multiple studies show that for women, wages tend to fall sharply after giving birth and remain lower for long after that — the so-called “motherhood penalty.” This holds true even if the woman earned more than her partner prior to childbirth, a 2023 study shows. The study found that after childbirth, women were more likely to drop out of the labor force and less likely to switch to — or perhaps, have less success finding — a higher-paying job compared to their male counterparts.
“Culturally, women are more likely to experience work disruptions for caregiving purposes,” says Dr. Jenny Olson, assistant professor of marketing at Indiana University’s Kelley School of Business.
These disruptions can erode a woman’s wages, which in turn hinders her ability to save, invest or build wealth for the future. That lack of income continuity can be a major financial hurdle, says Dr. Melissa Williams, associate professor of organization & management at Emory University.
“Women on average are more likely to experience breaks in their paid careers, sometimes because they’ve provided care for children and elders, or even because they’ve moved geographically to follow a partner’s career,” says Williams. “This can make it harder for women to grow a nest egg through savings, and even to max out Social Security benefits on retirement.”
Lower Credit Scores
A 2018 study by the Federal Reserve found that single women on average had lower credit scores and more negative factors in their credit history compared to single men. These findings were consistent even after controlling for age, education, race and income. (The study did not consider married men or women.)
That’s not to say women necessarily use credit less responsibly than men. The study posits that external factors like economic circumstances, labor market experiences and different treatment by institutions may contribute to the gender gap in addition to personal factors like financial literacy levels or attitudes towards borrowing.
Having lower credit scores could give women more difficulty being approved for loans or higher interest rates for loans they are approved for. For example, a 2016 study by the Urban Institute found that single women on average pay more for mortgages — a traditional path to building wealth in America — compared to single men or couples. They’re also more likely to be denied a loan.
A Longer Retirement
Although women face more obstacles in building wealth compared to men, they need to save more money for retirement. The average life expectancy for females is 5.8 years longer than the average male life expectancy, according to the Centers for Disease Control and Prevention. Women have a longer retirement and are “potentially more exposed to outliving their savings and becoming impoverished in later life,” says Mitchell.
This is especially true if they outlive any caretakers whom they expected to care for them, or have difficulty finding reliable caretakers, says Dr. Ginnie Gardiner, clinical associate professor of finance at the University of Massachusetts Amherst.
4 Steps Women Can Take To Build Wealth
Although systemic inequalities can’t be fixed overnight or by one person, you can still build wealth in spite of them. We asked the experts we interviewed to provide some fundamental steps and strategies women can take to achieve greater financial health.
1. Assess and regularly revisit your financial goals
“The first step [to building wealth] is to assess your values and long-term goals,” says Olson. If you’re in a relationship, you should also communicate with your partner and make sure your goals and decisions are aligned.
Once you know your goals, you can plot out how to achieve them. “Do you want to enjoy luxurious vacations in retirement? Do you want to help finance your children’s and grandchildren’s education? Do you want to donate a substantial amount to prosocial causes?” says Olson. Each of these goals will mean different priorities for the present and different paths for building wealth.
It’s important to regularly revisit your goals, says Olson, as your life circumstances change. Checking in on your goals can also motivate you with a sense of progress or tell you if anything needs adjusting.
2. Gain confidence through education
Mitchell says her research shows a gap in financial literacy between women and men. For example, a smaller percentage of women aged 50+ were able to correctly answer basic questions about interest, risk diversification and inflation, compared to men. “This lack of financial literacy then translates into greater financial regret among older women,” Mitchell says.
Other studies have found similar gender-based financial literacy gaps. However, a 2021 study found that one-third of the financial literacy gap can be explained by a lack of confidence, rather than objective knowledge. In other words, women may know less than men, but they also know more than they think they know.
This takeaway was reflected in the 2024 MarketWatch Guides Joint Banking Survey. Among respondents, a far lower percentage of married women (18.2%) said they were the more financially savvy partner in their relationship than men (43.5%). However, a far higher percentage of married women (36.4%) in the survey said that they were the more disciplined partner in the relationship, although still a slightly lower percentage than married men (41.4%) who took the survey.
There’s one thing that can fix the financial literacy gap: more financial education. Both Mitchell and Gardiner recommend increasing financial education among young people. But regardless of your age, shoring up on your financial knowledge will help you make more informed decisions and act with more confidence. If you’re reading this, you’re already on the right track.
“It is easier today than ever to find information on building wealth,” says Helen Moser, senior lecturer in finance at the University of Minnesota. “There are free financial help books available, and there are so many vehicles for saving that are easier to access than in the past.”
Natalya Bikmetova, assistant professor of finance at Hofstra University, says that women can learn valuable financial information from others, in addition to books, courses and educational resources.
“As a professor, I found networking and mentorship to be particularly useful to build confidence and empower [women],” she says. “It is vital to seek advice and mentorship and to share your expertise with fellow females as well to create a productive environment and grow your network.”
3. Invest more frequently and more confidently
The stock market is one of the best pathways to building long-term wealth, but women are missing out.
A 2021 report by Fidelity Investments found that only 67% of women were investing outside of retirement in 2021 and only 33% said they felt confident in their ability to make investment decisions. Furthermore, only 47% of the women surveyed said that, if given $25,000 to invest in the stock market, they would know what steps to take and do so. Despite this confidence gap that keeps more women from investing, Fidelity found that women investors actually outperformed their male counterparts by 0.4%.
“Women tend to report lower financial confidence (on average) than men, which may prevent them from taking informed action,” says Olson. “While being cautious can be a good thing, so is taking calculated risk to maximize returns.”
What does that mean for you? Invest early and invest whatever you can. High-yield savings accounts and CDs are good low-risk ways to grow your money, but don’t skip the stock market. And, while research is important, don’t feel like you need to wait until you’re a stock market expert before doing anything. Fidelity found that 69% of women surveyed wished they had started investing their extra savings earlier.
Even if you start with a few dollars each month invested into an ETF or a robo-advisor account, getting into the habit of investing your extra savings will help you gain confidence and build wealth over the long term.
4. Prepare for old age now
More women should be aware of longevity risk, or the risk of living longer than expected in retirement, says Mitchell. “People have a general notion of the average life expectancy for someone like themselves, but they woefully underestimate the chance they could live long enough to run out of money in old age,” Mitchell explains. This is especially true for women, who live longer on average than men.
Women who are financially dependent on another person, whether by choice or by circumstance, are at especially high risk of financial difficulty if their provider leaves them in death or divorce, says Gardiner. She recommends that women who enter into a relationship where money is commingled should take steps to ensure they have sufficient financial independence. “This could mean a separate bank account, prenup, safe deposit, box, life insurance, [or] joint ownership of assets,” she says.
As for outliving one’s own savings, Mitchell says a good way to prevent this scenario is to start planning for it early. “Given the fact that longer-lived women are quite likely to experience health problems — including dementia — at older ages, making provision for one’s old age early in life is critically important,” she says. This could mean choosing to invest more money in your retirement accounts or exploring options like long-term care insurance or longevity insurance.
Final Thoughts
While many of the systemic obstacles women face in the financial sphere can’t be fixed overnight, there are still things you personally can do right now to improve your financial health and build wealth.
Keep learning about the intricacies of personal finance, start investing if you haven’t already and get strategic about your financial goals are how you plan to achieve them.
Remember: Research has shown that you likely know more than you think you do. And if there’s anything you don’t know, well — that’s what we’re here for.
Methodology
In order to provide an accurate picture of the state of gender and wages in the U.S. and effective advice to women for building wealth, we at the MarketWatch Guides team conducted a comprehensive study. This study included research into U.S. Census data and conversations with experts in the fields of finance and sociological studies.
The data we used include:
- U.S. Census Bureau, Current Population Survey, 1961 to 2022 Annual Social and Economic Supplements (CPS ASEC)
- 2022 American Community Survey, U.S. Census, Median Earnings in the Past 12 Months (in 2022 Inflation-Adjusted Dollars) of Workers by Sex
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