Wealth creation among women is growing. Globally, women’s wealth has shown unprecedented growth over the last decade. This group is currently creating wealth at a faster rate than at any one time in history. According to Consultancy group Boston Consulting Group (BCG), women hold nowadays an average of 40% of global wealth, and this could rise at a compound annual growth rate of 7.2% by 2023, outpacing the 5.2% compound annual growth rate projected for men.
Why should this matter for women and their assets?
As women become wealthier, their influence is growing. They are beginning to redefine areas that have traditionally been focused on, and dominated by, men.
In this article, we highlight four facts regarding empowering women’s wealth management and promoting female financial literacy:
1. Women are savvy investors but there is a lack of financial confidence: studies suggest that despite their tendency to underestimate their financial knowledge, women as a group tend to outperform men
A number of studies over time suggest that women tend to outperform men in their investments. The University of Warwick, in England, for instance, tracked investors’ performance for three years. Its findings in the research paper ‘Are women better investors than men?’ published in 2018 indicated that women outperformed men at investing by 1.8%. Men were likely to pick more speculative stocks, while female investors had a longer-term perspective. Researchers indicate that behaviourally women tend to be less confident about their investing than men, and hence more likely to be risk averse (47% vs 39% for men, based on 2015 industry research by SigFig, the Wall Street Journal and Vanguard) and open to advice (64% vs 56% for men).
2. Women have less earning power compared to men: the gender gap in wages translates into wealth and retirement gaps
Women earn less than men, with women earning 81 cents for every USD dollar earned by men on an uncontrolled basis (this measures median salary for all men and all women), according to our Women and wealth report published on March 2021. Even on a controlled basis (measuring median salary for men and women with the same job and qualifications), women still earn less, at 98 cents for every USD dollar earned by men. Within Asia, Korea and Japan are among the most biased markets, with women earnings 33% and 24% less than men, respectively. Part of this is because women lose earnings with time out of the workforce as they spend more time on child rearing than men. This appears to be the case even in Scandinavia, where social policies are more generous and culture, more egalitarian. Over time, the disparity has resulted in yawning wealth and retirement gaps that are hard to close.
3. Women have a longer life expectancy: they live longer, and hence need to plan for a longer retirement
Women live longer than men on average. According to the international organization Population Reference Bureau, women outlive men in almost every society. In more developed countries, the average life expectancy at birth is 79 years for women, 72 years for men. In less developed countries, where high maternal mortality reduces the difference in longevity, women can expect to live an average of 66 years, compared with 63 years for men. Yet, women may not be prepared for a longer retirement, with only 53% of women reportedly starting to save for retirement vs 65% for men.
4. Women have the tendency to make fewer large financial decisions in a household: this results in women potentially being less prepared for retirement or feeling pressured over their personal finances
It is no wonder, then, that S&P Global found that more than 80% of women in Japan and Korea are worried about their personal finances, with 85% and 87% of Korean and Japanese women saying that they were in ‘fair’ or ‘poor’ financial shape. Women were also less likely to be responsible for household financial decisions. In Singapore, studies indicate that the only area where women assumed sole financial control was in groceries and day-to-day purchases (52% of women are solely responsible for this vs 32% of men).
We therefore make the case for more active participation by women in managing their wealth, given longer life expectancies, less earning power relative to men, tendency to make fewer large financial decisions in a household, and ability to invest. We continue to advocate investing early and often, for longer periods, to take advantage of the magic of compounding.
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