Millennial women are the age group most likely to say they’re in “survival mode” (33%) when it comes to managing their finances. But according to key indicators of financial health, 30% are actually thriving.
Women we surveyed report feeling less confident than men across all key factors of financial health. Only 36% of women (versus 47% of men) agree that they are confident in their financial plan.
When it comes to retirement savings, women report needing significantly less ($496,631) than men ($822,064), even though women on average live longer.
Lacey Cobb, CFA, CFP®, Personal Capital Director of Advice Solutions, weighs in on best practices for managing your money and building wealth.
Let’s start with the good news: You may be more financially healthy than you think.
Americans we surveyed for our recent Wealth & Wellness Index* consistently rate themselves as less financially stable than they actually are.
Women in particular understate their financial health. Below, the “Self-Rated” columns indicate how respondents say they’re doing with their money – just surviving, feeling stable, or thriving. The “FinWell Score” shows how they were ranked according to key indicators of financial health.
Gen Z Women
Gen X Women
Why do the women we surveyed underestimate their financial health? Herein lies the bad news. These individuals report:
A lagging sense of financial confidence
Lower income and savings expectations than men
Reduced prioritization of long-term financial goals
“A solid financial plan is important for anyone,” says Lacey Cobb, Personal Capital Director of Advice Solutions and certified financial planner. “This may be even more true for women given their longer life expectancies and other unfortunate societal factors like lower rates of investing and lower expected income.”
At a macro level, women are in a strong financial position. Women in the U.S. control $22 trillion – over half of the country’s wealth. What’s more, by 2030, it’s estimated that women will control two-thirds of the nation’s wealth, due to organic growth and intergenerational and spousal transfer.
“For anyone wanting to improve their financial health, I’d suggest taking matters into their own hands,” Cobb says. “Learn. Utilize free resources. Consider working with a fiduciary advisor you trust. A sense of financial confidence comes from taking action.”
Financial Confidence – It’s More Than Just a Feeling
Notably, 56% of the women we surveyed report an increased sense of financial confidence over the past year. However, that gain is to a lesser extent than the men we surveyed (68%). Additionally, women report less confidence than men across all key factors of financial health.
Troublingly, this is most true among Gen X women, who are in their peak earning years and overall as a generation saw the biggest increase in wealth since the pandemic began.
Rate your confidence in the following areas.
Gen Z Women
Gen X Women
Ability to build emergency savings
Ability to achieve saving goals I’ve set for myself
Ability to plan for retirement
Ability to retire when I want
Ability to leverage my financial assets to maximize my overall wealth
Ability to minimize my taxes
State of the economy overall
Job security overall
Moreover, across the spectrum of emotions, men are more likely than women to associate positive feelings with their finances. Women are more likely to report feeling stressed and unsatisfied.
Of note, both genders most heartily agree that they feel optimistic and hopeful, though women feel this to a lesser extent.
When you think about your financial health journey, what do you feel?
“Money tends to be emotional for people,” says Cobb, “and like anything else, the best way to manage emotions is to focus on what you can control. When it comes to finances, you have at least some control over how you spend, save, and invest. So this should be the focus.”
Cobb says getting clarity on your money and creating a plan can help harness a sense of financial confidence.
How to Gain Financial Confidence
In terms of learning about personal finance, 61% of surveyed women versus 71% of men say that they actively read and seek new information. Millennial women (73%) were the only age group to outrank men in saying they’re studying up on financial topics.
Following are Cobb’s insights on a few key areas that help determine financial health: income, debt management, emergency savings, and retirement planning.
1. Consider your income.
Income is important; a steady paycheck enables you to consistently afford everyday needs, budget for upcoming expenses, and, ideally, invest in long-term goals.
Women (46%) are more likely than men (42%) to say their salary is a top factor in determining their financial health. However, 33% of women (and just 27% of men) say their income is their biggest roadblock to becoming financially healthy.
The gender wage gap persists: Women earn 82 cents for every dollar a man earns, according to 2020 data from the Bureau of Labor Statistics. Over recent decades, the gap has narrowed among younger women as they break into higher-paying occupations traditionally dominated by men. (However, among individuals with college degrees, the gender earnings gap is even wider.)
In our recent survey, women report a lower “desired salary” than their male counterparts. Women say they need to earn $101,153 annually to feel financially healthy. Men say they need $142,388. Over the course of a 30-year career, that higher salary would give someone a $1.2M advantage. (Of note, this is not accounting for raises, which men receive more frequently.)
“In your career, it’s essential to advocate for yourself – get the market rate for the work you provide,” Cobb says. “And then remember: How much money you earn is only part of the overall picture. Equally important is what you do with your earnings.”
Keep Learning: How to Negotiate Your Salary and Career Advancement
2. Pay attention to debt management.
For many people, paying off debt is a long-term challenge.
Women, more than men, are prioritizing debt paydown, with 39% of surveyed women versus 34% of men saying it’s their top goal for 2022.
And the focus is with good reason: Women we surveyed (45%) are less likely than men (56%) to say that their debt is manageable.
Read More: What is Debt Management?
For respondents paying off debt, debt type varied by gender. More men than women are chipping away at student loans, mortgages, and medical bills; women said they’re most inclined to be tackling personal debt.
What type of debt will you plan to pay off?
Paying off a mortgage
Paying off medical bills
Other personal debt
“Personal debt is extremely common,” Cobb says. “It’s nothing to feel ashamed about. But due to high interest rates, you may start to feel like you’re constantly throwing money at your debt. That can definitely bring stress into your life.”
In paying off debt, Cobb says it’s important to prioritize high-interest debt, and then move on to debts that aren’t accruing as much interest. Debt consolidation services may also be an option.
“Not all debt is bad,” she adds. “The most important aspect of managing debt is consistently making payments. Carrying ‘good debt,’ like a mortgage, signals to creditors that you’re a responsible credit user.”
This strengthens your credit score and may allow you increased credit lines to finance future purchases, like a rental property.
3. Maintain an emergency fund.
Your first line of defense against debt is a cash emergency fund. For women we surveyed, building an emergency fund is among their top financial goals in 2022: 38% of women versus just 25% of men say it’s a priority this year.
“This goal deserves to be celebrated,” Cobb says. “An emergency fund serves as a bedrock of financial health.”
Of the Americans we surveyed, women place a higher priority than men on the importance of being able to withstand unexpected financial needs, with 45% of women versus 38% of men saying it’s a top factor in determining their financial health.
Yet only 47% of women (versus 58% of men) say they could handle a major unforeseen expense ($500 or more) without worrying too much about it.
How Much to Save
Exactly how much you need to have stashed away depends on your expenses and household income. Cobb advises keeping between three to six months worth of basic expenses in an easily accessible savings account. If you’re part of a two-earner household, you may feel comfortable with less.
An emergency fund can be difficult to start without high income or financial windfall. Cobb suggests starting with an attainable goal, like setting aside $500 in two months. Once you meet that target, bump the goal up again.
“Don’t feel discouraged if you have to start small,” she says. “Remember that having some money to fall back on in a time of crisis is better than having nothing.”
4. Invest in retirement planning.
Saving for retirement is possibly a person’s largest expense throughout their life. However, many adults nearing retirement age may not be prepared to retire: 60% of men told us they have some form of retirement savings; the same is true for only 53% of women.
“It can be challenging to save for long-term goals, particularly with rising expenses and many current competing priorities,” Cobb says. “Try to consider it a payment to your future self.”
In that, take into consideration how much you may need. Our survey revealed that women believe they need significantly less than men in retirement savings, even though women on average live longer.
How much money do you need to have saved for retirement?
“Retirement planning is important – especially for women, due to longer life expectancies and, thus, potentially more healthcare expenses in those extended golden years,” Cobb says.
She says that most people want a straightforward, dollar-figure-answer for how much they need to save. “The reality is it is not that simple,” Cobb says. “It’ll depend on your spending needs, future goals, where you live, and many other factors. The best way to get a grasp on this is to create a retirement plan using financial planning tools that can help calculate this figure for you.”
Why to Invest
The sooner you start investing money for retirement, the greater your opportunity to take advantage of the power of compounding. With compounding returns, you earn money not only on the amount of your initial investment, but also on the money that your investment earns.
However, amidst a period of volatility like our current market environment, investors tend to become wary of the stock market in general. This could be detrimental to building wealth over time.
“Once again, try to focus on what you can control, like maintaining a balanced portfolio and consistently investing,” Cobb suggests. “It would be a very poor investment strategy to react to the latest headlines by making decisions in your investment portfolio. Investors should focus on making sure they have a properly diversified portfolio with the appropriate amount of risk rather than trying to time when to buy into the stock market.”
How to Invest
As much as is possible, Cobb recommends investing in your employer-provided 401k or other types of retirement accounts. “Typically, the best approach is to automate these savings by participating in employer sponsored retirement plans or setting up recurring contributions into your investment accounts,” Cobb suggests.
Look into free resources to help you determine the best retirement plan for you:
How Much to Invest
How much should you save for retirement? That depends on a variety of factors: retirement horizon, anticipated retirement income, overall health, and desired lifestyle.
As a starting point for figuring out how much you should be stowing away, Cobb suggests setting age-based retirement savings goals. Here are potential benchmarks:
Age 30: Have saved an amount equal to your annual salary
Age 40: Have saved an amount equal to three times your annual salary
Age 50: Have saved an amount equal to six times your annual salary
Age 60: Have saved an amount equal to eight times your annual salary
Age 67: Have saved an amount equal to 10 times your annual salary
“Retirement planning – like personal finance overall – is personal to you and your goals,” Cobb says. “Having a plan in place can help give you peace of mind and free up energy to focus on the areas of your life that truly matter to you.”
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* Survey Methodology: This survey was conducted by The Harris Poll on behalf of Empower and Personal Capital from October 29 to November 3, 2021. We surveyed 2,006 U.S. citizens ages 18+. This study also references data from prior research, including a study conducted from March 23, 2021 to April 8, 2021 with 2005 respondents; a study conducted from November 25, 2020 to December 11 among 2008 adults; and a study conducted from December 18 to December 30 among 2001 adults.