The Best Defense Against the Gender Pay Gap

Many of us are familiar with the gender pay gap. But the numbers most commonly reported—women earning only 76 cents for every dollar a man earns—is only part of the problem.

Research shows 60% of women bear the responsibility of caring for sick or aging family members in their peak earning years. To make matters worse, women are more likely to experience age discrimination in the workforce. And if you are a woman of color, the pay gap is even wider.

Fortunately, one of the best ways to grow wealth is accessible to everyone. Although often underutilized by women, investing is a powerful way to counteract the negative impacts of the gender pay gap.

Disclosure: This post may contain affiliate links.

The best defense against the gender pay gap is investing.

When it comes to investing, many women are still hesitant about the stock market. But we actually have a slight advantage over men when it comes to long-term investing.

Research has shown men tend to be overconfident investors. This can lead to excessive trading which can hurt returns. But women are more likely to plan for the future, efficiently manage risk, and exercise patience.

Pretty encouraging, right?

The gender pay gap isn't going to be solved overnight. But as MarketWatch journalist Andrea Coombes points out, the stock market doesn't know you're a woman.

If you still haven't started investing, here are some easy ways to begin.

Just get started.

Getting started can be the biggest hurdle for many investors.

It's better to have an imperfect strategy than to avoid the stock market completely. The sooner you begin, the more time you have to take advantage of compounding.

Don't believe me? Play around with this calculator.

Automate your savings.

You can’t spend money that never hits your checking account.

Here are a couple of ways to automate your savings:

  • Speak with your company’s HR department about automatically deducting a certain amount of money from every paycheck and depositing it into your investment account.
  • Ask your bank to automatically transfer a fixed amount from your checking account to your investment account every month.

Related: The Secret to Mindful Budgeting

Be strategic about where you invest. 

Once your budget is under control, you're probably thinking “what's next?”

As more cash becomes available, you will be faced with a ton of options!

Prioritizing these accounts may help you save on taxes:

  1. Take full advantage of your employer's 401(k) or 403(b) match.
  2. Funnel money into your health savings account (HSA) if you are eligible.
  3. Max out an IRA.
  4. Contribute to your employer plan if the fees are reasonable.*
  5. Invest in a taxable account.

*Personal Capital’s free Fee Analyzer tool can tell you exactly how much you’re paying.

Keep it simple with index funds and ETFs.

Almost no one is successful when it comes to picking individual stocks.

Not professional fund managers, celebrity “money gurus,” or your co-worker.

There is a much less sexy, but more effective approach to investing.

Have you heard about index funds?

Index funds are a type of mutual fund that track a portion of a market (ex. the stock market or bond market). Index funds differ from actively managed funds because there isn’t a manager overseeing which investments to include.

For this reason, index investing is considered passive.

But here’s the thing—despite their higher fees, there’s no evidence actively managed funds outperform index funds.

In fact, indexes outperform actively managed funds 92% of the time.

So, why pay 1% in fees for an actively managed fund when index funds charge a fraction of that? Here's an example of how a 1% fee can impact your portfolio over time.

ETFs are similar to index funds, but they trade like individual stocks. ETFs are a great option for investing beginners because there are no investment minimums.

You can use a tool like Morningstar to research individual investments.

You will need to choose your investments based on your personal risk tolerance. Your retirement timeframe is also important, and the portfolio should be rebalanced periodically.

If this feels too overwhelming, you could explore target date retirement fund options. These funds choose your allocation automatically based on your age and expected retirement date.

Or you could work with a robo-advisor. I recommend Betterment.

Regardless of which option you choose, you need to keep an eye on the fees.

Ignore the noise.

The media constantly pressures us to make emotional money decisions.

The media + social media is an even more dangerous combination.

Once you have crafted your investment strategy, you need to stay the course, despite what’s happening out there.

Remember, despite all the drops, the stock market has historically moved upward. Even dips like our last recession from 2008-2009 are less scary when you review the stock market's performance over the past 100 years.

That’s why there is no better day than today to get started with investing.

Readers: How are you fighting the gender pay gap?

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Discussions — 3 Responses

  • Chonce July 10, 2017 on 10:56 am

    YES! I never really thought about this, but you are so on point! I need to share this with all the women I love and appreciate. It’s time for women to stick together and grow with each other, even financially. We CAN make a difference.

  • Amanda July 11, 2017 on 8:25 am

    Good point! And such a simple action to take! When I recently realized that in order to meet my FI goal, I’m going to have to double my income, I thought, “I should ask for a raise.” Then immediately started listing in my mind all the reasons I wouldn’t get one. I want one, though, so I can INVEST more:) I will ask for that raise, and that will be one way I’m fighting the pay gap. Another way will be to share this post. And I will invest invest invest.

  • Leisa Hammett July 11, 2017 on 11:00 am

    In that caretaker community are women who often experience the consequences for choosing to take time off to raise their children full time. And the stakes are greater for those of us whose children have special needs. I’ve spent the last entire year helping my daughter get into adult services now that she’s in school. In a 10-year period, 500,000 youth with autism (now 1 in 68 children) will age out of their school systems and into adulthood. Thankfully, I do have some investments. But her needs have created a huge chasm between myself and earning potential and employment opportunities and it continues. And now I am 57. I’m in the process of receiving certification and accreditation to become a holistic self-care coach for individuals and families with a specialization on special needs parents. This will allow me to continue to have a flexible schedule and continue to provide the assistance my daughter needs. So, yes, elder care, but also those of us with children with disAbilities. Our numbers are vast and yet overlooked. Thank you for pointing out caregivers in this gap.


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