Women, Wealth, and Financial Equality: Closing the Gender Gaps in Finance

The Wage Gap

The wage gap has been a long-standing issue, and it is often top of mind when considering financial inequalities related to gender. In 2022, women earned less on average than their male counterparts, earning only 82% of what men earned. This issue disproportionately affects women of color, with Black women earning 70% as much and Hispanic women earning 65% as much as White men in the same year. Many factors contribute to the persistence of the wage gap, including discrimination, occupational segregation, and unequal expectations regarding unpaid domestic labor and caregiving responsibilities. Because a person’s income is one of the largest factors affecting their financial well-being, a lower income can drastically limit a person’s ability to build wealth and achieve their financial goals. Consequently, increasing women’s earning power will dramatically increase their ability to close other finance-related gaps and successfully advocate for equality in other areas.

The Advisory Gap

Access to financial advisory services and representation in advisory roles are two closely related areas in which gender disparities are evident. Traditionally, financial advising and wealth management have been male-dominated professions, and this trend continues today; less than a third of financial advisors are women despite increases in diversity, equity, and inclusion programs over the past decade. Without access to female financial advisors, women are at a higher risk than men of receiving biased financial advice based on inaccurate assumptions regarding their financial knowledge (or lack thereof), risk tolerance, and financial priorities. Additionally, women may encounter other barriers in accessing adequate financial advisory services, including a lack of services tailored to their needs and interests and social pressures that discourage women from discussing money. These factors make it more difficult for women to access the guidance and resources that would help them generate passive income through investments and to build wealth on a larger scale.

The Investing Gap

Women tend not to invest as much as men do, and according to a 2021 study by BNY Mellon, if women increased their rates of investing to match men, at least $3.22 trillion more would be invested from private investors. Similarly, in a 2021 study conducted by Fidelity, only about 33% of women reported feeling confident in their ability to make investment decisions, and 77% of women reported that they would feel more confident about their financial future if they had a financial advisor to help them. It is likely that the wage gap may contribute to the investing gap, with women having less discretionary income to invest compared to men. However, according to the same study, even among women earning more than $100,000 per year, 51% reported they would not know what steps to take if given $25,000 to invest in the stock market. These statistics indicate that a lack of confidence, practical finance knowledge, and access to advisory services are key factors discouraging women from investing. 

The Wealth Gap

All three of these gaps have culminated in a notable wealth gap between men and women, in which men, on average, have a staggeringly higher net worth than women. Differences in wealth accumulation can be difficult to measure because a person’s level of wealth will change depending on their stage of life. However, according to a 2021 study from the Federal Reserve Bank of St. Louis, unmarried women owned about 34 cents to every dollar owned by unmarried men. At the household level, families headed by women had accumulated only 55 cents in median net worth to every dollar in the net worth accumulated by families headed by men. This wealth gap makes sense, considering that the primary way to build wealth is through having disposable income to regularly invest over long periods of time. Thus, it’s clear that addressing the other gender-related financial gaps will play a big role in narrowing the overall wealth gap.

How to Close These Gaps

Closing gender-related financial gaps will require a concerted effort across various fronts. Because these issues are so intertwined, they require multifaceted and systemic solutions to address both the root causes of each issue and the myriad consequences they create for women and men alike. One prong of the solution will be to continue spreading awareness of the gender-related financial disparities women face so that issues such as unequal pay, unbalanced expectations regarding domestic and caregiving labor, and unequal representation in advisory roles can be combatted wherever they exist. Additionally, it will be crucial to promote financial education and empowerment among women so that they can gain confidence and practical knowledge of saving and investing strategies to build wealth at higher rates. This will include encouraging more women to take on financial advisory roles and to amplify the voices of female personal finance educators and content creators.