The state of women’s financial and emotional confidenceNew research from The Guardian examines the role gender plays in retirement-readiness, and the degree to which consumers’ believe that they are indeed prepared to retire. Excerpts are presented below. Access the full study here.
Guardian’s Study of Financial and Emotional ConfidenceTM explores how financial behaviors and habits affect one’s overall life satisfaction and well-being. Among other results, Guardian learned that income is not the sole driver of financial confidence and success. In fact, proactive financial habits and knowledge of financial concepts and products are more closely tied to higher levels of financial and emotional confidence than simply how much one earns.
The report, Path to Prosperity, identified four types of financial behavior profiles: Day-to-Day Decision-Makers, Retirement Realists, Ambitious Spenders, and the most financially savvy and optimistic, Confident Planners. Women were most highly concentrated within the Day-to-Day Decision-Makers profile. This profile tends to lack a strong financial strategy and focuses instead on keeping up with day-to-day financial demands. In addition to the four profiles, the study revealed further differences regarding finances and confidence among other demographic groups, particularly women, millennials, and business owners. This brief explores the financial behaviors and habits of women, as well as model behaviors to help put them on their own path to prosperity.
Women Identify As Less Financially And Emotionally Confident Than Men
Financial confidence allows an individual to take control of their financial situation and gives them a much stronger chance of fulfilling the goals that matter to them. Emotional confidence impacts one’s overall well-being, happiness, and life satisfaction. Confidence doesn’t necessarily come from a high paycheck or a hefty nest egg. For instance, while women perceive themselves to be equally as financially independent as men, they are still 40% more likely to experience financial stress than their male counterparts. Almost 30% of women over age 65 report feeling very or somewhat worried about their current financial situations, compared with 20% of men that age.
It’s Still True: Women Earn Less Than Men
While strides in pay equity are being made, women reported earning approximately 22% less per year than men’s average annual income of $116K (based on a national survey of workers with household incomes of $50K or more).
The average annual Social Security income received by women 65 years and older is, on average, 80% of the Social Security income men receive. But it’s being a mother that mostly influences a woman’s income. A woman with one child earns 28% less on average over her career than a woman without children, partially as a result of time out of the workforce. Each additional child reduces a woman’s average earnings by another 3%. In contrast, becoming a father typically does not reduce a man’s earnings. Women are also more likely than men to care for their aging parents, a responsibility that Guardian has explored in related studies such as Workforce 2020 and Mind, Body, and Wallet.
Among this study’s four financial profiles, 3 in 5 women were in the two least confident segments, indicating a significantly lower level of financial and emotional confidence. Nearly 60% of female respondents fell into the Day-to-Day Decision-Makers and Retirement Realists profiles, compared to 33% of male respondents.
Not Only Do Women Earn Less, They Tend To Own Less Protection
Over the past five years, the life insurance ownership rate for US women has dropped from 57% to 47%. Additionally, 56 million women (43%) say they don’t have — or don’t have enough — coverage. In a related study, Guardian found that women own slightly less or are less likely to have protection than men in life insurance, disability insurance, accident insurance, pension plans, a last will and testament, long-term care insurance, hospital indemnity insurance, and cancer and critical illness insurance.
Marriage Is A Major Consideration When It Comes To Women’s Financial Health
Partnered and single women report similar levels of personal income — around $90K average for either relationship status. However, there is still a gap in confidence. Single women report lower confidence, with 33% categorized as Day-to-Day DecisionMakers; this is likely due to them being the sole breadwinner without a second income in the household. Divorced women also experience lower financial confidence. Gray divorce (divorce over age 50) now accounts for 1 in 3 US divorces and is growing. Women often initiate these late middle divorces, which may improve their emotional well-being, but as a result it frequently devastates their financial health and confidence.