Women continue to struggle for equality on many levels. Financially, we face an uphill battle to land the best jobs and earn an equal wage.  Women also face a dramatic disadvantage when it comes to investing for our long-term financial future.  This battle with our finances begins with earning a reduced wage for doing the same job and is made worse by the danger of being too careful with our money or the simple fact that women live longer than men.  All of these contribute to the investment gap women have to overcome to be on the same financial footing as men.

As a Generation X’er I grew up in the era of women’s lib and saw an increasing number of women enter the workforce, including my mom. I know many women who have risen to prominence thanks to those who fought the battle before us. But overall, we’re still playing catch up financially. The earning gap is well known. But that’s not the only disadvantage women face financially. There’s also a significant investment gap between men and women in our country. This gap challenges women as they seek to build sufficient assets to fund retirement, which today can span many decades.

To bridge the gap, we must first understand the reasons behind it and then take intentional steps to change the direction of investing for women and get them on the right path forward.

How did we get here?
This investment gap is a product of both societal norms and behavioral differences between men and women. (Remember Venus vs. Mars?)  The initial cause of this gap begins with compensation. As we all know, women earn 77 cents on the dollar compared to men in the United States.  Because women earn less than men, they have less to save for retirement.

In addition to lower hourly earnings, women are more likely to take time off, reduce their work schedule or opt for a less demanding (and lower paying) job during child-rearing years.  Therefore, the 77 cent wage gets reduced even more for many women while they raise their children. As these compensation differences play out over a full career, women typically put away for retirement only about two-thirds as much as their male counterparts. And, with lower earnings over the span of their career, Social Security and other benefits may also be reduced below that of the men in the same career.

The danger of safety
The wage gap is compounded by another factor to make the investment gap greater. Basically, women behave differently when it comes to investing. Women are generally more risk averse with their money.  As a group, we prefer ‘safer’ and less volatile investments.  Unfortunately, reducing risk in a portfolio also reduces its expected return.  And this reduced expected return over the lifetime of a portfolio can be detrimental.

Everyone understands the dangers of taking too much risk in investing – such as betting all your savings on an unknown startup – but taking too little risk can be dangerous too.  Overly favoring safer investments over appreciating investments can lead to very low returns that barely beat inflation and do little to build portfolio balances for the long term.

Earn less, live longer
And finally, to add insult to injury, women have a higher life expectancy than men. On average, women live five years longer than men. The money in a woman’s portfolio is not only a third less than a man’s; it also has to last five years longer.

Taken together, lower pay, reduced work hours, aversion to risk and a longer life expectancy severely limit the retirement income available to a woman. This reduced income will significantly impact her lifestyle throughout retirement – meaning she may need to work longer or spend significantly less in retirement than her male counterpart.

Close the gap
Women face real disadvantages related to building wealth. But they are not insurmountable. Many women can and do manage their money successfully and enjoy financial security.

The most important step for women to get on the right track financially is education. The more you know about money, the greater confidence you will have about your future, and the better equipped you will be to make financial decisions for yourself and your family.  Take the time to read books, take a class or ask questions.  Do not be afraid of what you do not know.  Take the power to learn and put yourself in a better place.

You may not have control over the pay gap for all women in this country, but you can control your own portfolio and how it is invested. You can control whether it is aligned with your long-term goals. You can control some factors that influence your taxes. You can control your investment costs and make sure you keep more of what you make.

I encourage all women to fight the gap, early and always. Just like saving, the sooner you start to address your personal investment gap, the more progress you can make toward long-term financial stability.