Women have unique factors in their financial journeys. Some are long-established, such as the ongoing gender wage gap, but some are being newly documented, like caregiving (an unpaid commitment that primarily falls to women1) and its impacts to long-term wealth.
Yet despite the headwinds, women actively take steps to pursue financial freedom. Many seek out education or advice and guidance services to learn how to better manage the money they have.
If such resources are available through the workplace, employers can position themselves as powerful advocates — helping women boost their financial confidence and improve their outcomes by addressing their full financial wellness, including the logistical and psychological pieces.
Financial factors affecting women
Economic pressures
The ongoing gender wage gap leaves women more susceptible to the impacts of inflation. Recent consumer research found that 81% of women agree that inflation has made them more stressed about their personal financial situation.2 As a result, women are significantly more likely to tighten their spending budgets to pay for household expenses or other financial obligations.
Career interruptions
Women are more likely than men to reduce their work hours to care for a child or family member.1 In fact, 58% of long-term caregivers are female.
Women tend to experience numerous career interruptions, whether it be raising children or taking on the role of caregiver for a family member. caregivers spend around a quarter of their income on caregiving expenses, adding to their financial burden.3
Career interruptions have significant financial impact, as they often result in reduced contributions to employer retirement plans (and missed employer matching contributions, if available) plus fewer opportunities for professional advancement and subsequent pay raises.4
Women in the legal industry – despite its special status and relatively high incomes – are not immune. Almost 40% of mothers practicing law said they had been denied a salary increase or bonus, compared to a little over 20% of fathers.5
Hindered savings potential
After using their funds for day-to-day living expenses, women have less money left to save for later. DEI research from Voya Financial finds that women are more likely to have inadequate emergency savings — and this shortcoming can put their retirement at risk.
Without sufficient emergency savings, employees often take early withdrawals from their workplace retirement plan to meet short-term financial needs. Women with inadequate emergency savings are over 4.5 times more likely to take a withdrawal from their plan.6
Competing priorities
With a long to-do list encompassing labor at both home and work, personal finances can quickly be de-prioritized. It’s not surprising that less than one-third of women feel in control of their finances.7
Thankfully, with the right tools, employers can help their female employees by easing some of the mental load that comes with complex financial planning and decision-making.
How can firms support women’s pursuit of financial freedom?
1. Have a well-designed retirement program
There are retirement plan features that can help women make better use of their retirement plan to build long-term wealth — even when they’re worried about paying bills today. Think: budgeting calculators, advice services, auto enrollment, auto escalation and match programs that leverage the latest behavioral finance. By focusing on overall retirement plan participation, you encourage women (and all employees) to save without thinking about it (and thus, help avoid the psychological barriers that often derail long-term goals).
2. Focus on financial confidence
Only 32% of women were mostly or very comfortable managing their retirement investments according to a 2023 report by the Federal Reserve System.7 Taking time to teach financial principles (and reinforce their existing financial knowledge) can help women build up their financial confidence. Giving them access to educational resources, like live and on-demand learning sessions, and sending targeted, engaging messages are great places to start.
3. Make it personal
Broad financial education is beneficial for building overall confidence but consider taking it a step further and help your female employees see what matters to their personal finances.
- Women who are enrolled in in-plan managed accounts have a higher savings rate than those that aren’t enrolled.6
- 40% of women who work with a financial advisor feel very prepared for retirement (compared to just 27% who don’t work with one).8
An employee experience like the tools provided through the ABA Retirement Funds Program can help bridge the gap between overarching and highly personalized financial insights. Our online experience quickly shows plan participants their full financial picture, then offers helpful resources and calls-to-action to guide them toward better decision-making. Using behavioral finance, the digital experience removes barriers between gaining knowledge and taking action.
Many women, however, already bear a large mental load, being the primary manager of their own home, family, work, and other commitments. To help, consider offering advice and guidance options as part of your retirement program.
This is an easy way to help your female employees get financial advice for their unique situation. Having a professional financial planner in their corner may help women feel more confident about their short-term and long-term finances.
Financial Wellness Matters
By recognizing and researching gaps in financial wellness across demographics, we can start to remove barriers to financial success and help women build financial confidence. Contact us to learn more about how we can help you incorporate these wellness solutions into your retirement plan.
SOURCES:
1 Employee Benefit Research Institute and Greenwald Research; 2023 Workplace Wellness Survey; 2023.
2 Based on the results of a Voya Financial Consumer Insights and Research Survey conducted June 12-13, 2023, on the Ipsos eNation omnibus online platform among 1,004 adults aged 18 + in the U.S., featuring 511 women.
3 American Association of Retired Persons; Caregiving Out of Pocket Costs; June 2021.
4 Based on results of a Voya Financial Consumer Insights & Research survey conducted between March 3-4, 2023 among n=500 Americans age 18+ who are full-time employees and actively contributing to their employer sponsored retirement plan balanced by age and gender to reflect the U.S. population.
5 The “Motherhood Penalty” And Its Impact On Women’s Careers – First National Study of Parenting and Legal Careers, October 2023, The Red Bee Group.
6 Based on internal Morningstar data, October 2023.
7 Federal Reserve System; Economic Well-Being of U.S. Households in 2022; May 2023.
8 LIMRA; Impact of Financial Professional on Retirement Security; 2023.
For plan sponsor/employer/consultant/financial professional use only. Not for use with plan participants or the general public.
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