In our society, women’s money experiences are vastly different than men’s.? Money is divided along gender lines in ways that might not be obvious at first. Women are at a disadvantage when it comes to earning and saving. It also costs more to be a woman.? These differences add up and ultimately impact a woman’s ability to retire in an equal manner as a man.
Women are at a disadvantage when it comes to earning and saving. It also costs more to be a woman.
The Pay Gap
On average, women still live longer than men do. This means that, to have the same quality of life after retirement, women have to save more than men. Their retirement pot has to be bigger because it has to last for a longer period of time.
Women also have to save more as a percentage of their income.?Let?s say we take the popular statistic that women make 78 cents to every dollar that men make. If men save 10 cents of that dollar, women have save 10 cents from 78 cents to be on an equal footing.? In addition, because we live longer, we have to save even more (say, 12 or 15 cents out of that 78 cents).
We all know how hard it is to save 10%, 15% or 20% of our take-home pay.? On a lower base, it?s even harder for women because it?s not like rent or food is cheaper for women. In fact, when it comes to women, many consumables are even more expensive.
Women generally live longer than men do and have to save more as a percentage of their income for retirement.
Gender specific consumable goods are more expensive for women.? There are more examples than we can count: vitamins, razors, shaving cream, drugstore lotion, dry cleaning.??These products and services cost more once they are branded pink.? According to the NYC Department of Consumer affairs, women pay more for pink packaged products 42% of the time.? Even if we say the price difference is only 5% more, we’re not just talking about a single item.?There can be 10-20 regularly purchased items, each priced at 5% more!
These additional costs add up.? Combining in the wage gap, it?s clear how women can end up retiring in very different financial circumstances than men.
According to the NYC Department of Consumer affairs, women can pay more for “pink packaged” products 42% of the time.
It is well known that women often take time off to raise children, or take care of aging parents.? As a result, women?s earning potential is greatly disadvantaged.? What?s more, they are also likely to be living off savings during these pauses.? How likely is it that a woman will be able to save for retirement during this time?
Some may argue that perhaps a woman has fewer costs during this time because her husband may still be working.? But what about professional single women who are choosing to raise children solo?? What about divorced women who have to take care of their elderly mothers? What about single mothers?
So as it turns out, women may have fewer years to save for retirement.
Women have fewer years to save, have to save more, all the while earning less with higher costs, to live a comparable life to their male cohorts.?
Financial Services under-serve women. When/if women marry, financial advisors often address the husband or have him as the primary contact.? They may even dismiss the women?s concerns or objectives. She may feel talked down to because she isn’t familiar with?the financial jargon an advisor is using. Discouraged, she may tune out these conversations and withdraw. Resigning herself to letting ?the man of the house? take care of these decisions can be detrimental, as we outline in the Distressed Decisions section below.
Because financial information has been historically directed at men, fewer women invest in stocks than their male counterparts. These under-invested women are not fully participating in the wealth accumulation.? In a society with a shrinking middle class and greater inequality in executive vs. employee pay, women face the double whammy of being the both employee and not sharing in the benefit of higher corporate profits as other male shareholders.
Because financial information has been historically directed at men, fewer women invest in stocks than their male counterparts.
Women are more likely to assume control over finances during the most difficult times. This is usually during or after a divorce, or after the death of their spouse, but it could also be because of the death of a parent.? I have several professional female friends whose fathers run their investment portfolio. And it?s not uncommon to hear of a woman who has no idea what is in their investments because their husbands take care of it.? They feel their father or husband has the expertise. Though this may or may not be untrue, the situation is not sustainable.
In the case of divorce or death, these women may have to make critical financial decisions when it is cognitively hardest for them to do so.?I remember when my father passed away, I had trouble choosing pink or red roses for his wreath. I just couldn?t think.? Now imagine if that decision was something that had some serious financial bearing. It’s easy to see how these difficult times are when financial mistakes are likely to be made.
Women are more likely to assume control over finances during the most difficult times.
Social status for women requires her to spend. I’m not talking only about designer shoes or handbags. What I’m talking about is much more insidious. Society expects women to be “generous”.? To achieve social status, women are often pitched to serve on volunteer boards, or to chair fundraising committees. They are encouraged to donate their time and money.
Don’t misunderstand, these charities do need donations. Volunteering can be highly rewarding and fulfilling.? (I encourage everyone to participate in philanthropy.) But if a woman doesn?t want to donate or volunteer, we must not judge her to be selfish or petty. Many women simply have too much on their plates to take time away from their work and/or children to participate.
To achieve social status, women are often pitched to serve on volunteer boards, or to chair fundraising committees.
What can women do?
It’s apparent that gender, income and investing are interconnected. Women face systematic money challenges, from earning and spending to investing and retention.? Personal finance for women is not as simple as “spend less than you earn.”
There are women who are in different situations, some of these issues may apply to them, and some may not.? Some of these observations may even apply to men as well.? My aim is to spur discussion, not to single any group out or to nitpick about where we might fit in the Venn diagram of inequality. However, unless people are transparent about their particular financial challenges, they can do very little about them.
Personal finance for women is not as simple as “spend less than you earn.”
1) Start an investment account or contribute just 1% more.
If you haven’t started to invest for your retirement, start. Don’t let fear of financial terminology or the belief that you don’t understand what you are doing dissuade you. Today, you don’t need a broker to start investing. With the advent of roboadvisors and financial technology, it’s easy to start investing, even with as little as $50.
2) If someone is managing your investments, take the initiative and call them to discuss it.
If you have someone managing your investments, don’t be afraid to ask what you are invested in. Ask questions about your investments so that you can research and learn about them. You may decide that you wish to change them, or re-allocate your funds to different investment vehicles. And be sure to find out how your advisor is paid. Many advisors make a commission from suggesting (often high cost) investment products to you. There are many fee-only advisors that will not take a percentage of your total net worth.
3) Ask for a raise if you haven?t gotten one in a couple of years.
Don’t assume that being offered a raise is par for the course. No employer is going to give away money if they don’t have to. If you haven’t seen an increase in your salary, take the bull by the horns and ask for a raise.
4) Take responsibility for your financial education.
Women of today are at an advantage when it comes to financial education. Why? Because we have the internet. Sure, it’s a given that many of us did not learn about finances in school, but don’t let that stop you from using one of the greatest resources available. Everything you need to learn about is online. Take responsibility and dive in.
5) Buy generic or male-branded consumer products.
No one is going to notice if you shave your legs with a blue or pink razor. In fact, there are ways to save money on shaving and also save our environment. Stop paying for things just because a brand’s marketing department has convinced us that we need it.
6) Talk about money.
Don’t let your a lack of knowledge hold you back from having discussions about money. Share budgeting tips with a friend. Ask close friends about their investment strategies. If they don’t have any, share what you are learning. The more women open up about money, the less uncomfortable we will be discussing financial issues. With each step we take, we can start to turn this tide.
Pauline Yan is?an investment portfolio manager at a multinational financial institution based in Canada.??She has earned the right to use the CFA and CAIA designations.??Her passion is in coaching and supporting women in financial literacy and achieving their financial goals.? You can reach Pauline at SundayBrunchCafe.
And whether you realize it or not, your money (and your debt) is working for or against you every day. Your money is doing things while you eat, sleep and go about your day. It?s very busy!
Every dollar you spend or keep in a bank makes an impact somewhere. And it?s never been easier to direct that impact to issues you care about and make money at the same time. Now you can invest with good companies and make a good return.
Things are changing. So let?s shatter some old myths right now because today you can make a difference and make money:
You don?t need to be wealthy or have a financial broker to be an impact investor.
You don?t need to use a bank that supports destructive ventures, just to get the best deal.
You don?t need to stick with a credit card that has a high interest rate and funds activities you despise.
You don?t have to own your home or install expensive solar panels on your roof to use renewable energy.
In the amount of time it takes you to read this article, you can start making an impact on People and Planet, and make money at the same time.
And you can do it right now, sitting at your computer in a matter of minutes.
4 of the easiest ways to make money with sustainable companies
1. Use Renewable energy and get $20 off your next power bill.
Even if you rent, you can take control of your energy source.
You don?t need solar panels to support renewable energy. You can invest in clean energy simply by paying your regular power bill with renewable energy credits. Let Arcadia Power pay your power bill.
And you?ll get $20 off your next power bill.
We tried it out ourselves and here?s how it works. You can decide if you want to allot 50% or 100% of your energy use to renewables. If you switch 50% of your bill to clean energy, there is no cost for the service. All you do is continue to pay your regular power bill. If you switch 100% of your bill to clean energy, it?s $0.015 per kilowatt hour (that?s about $5 – $15 per month extra, depending on the size of your home).
Arcadia?s user friendly dashboard makes it easy to track your energy usage and view its environmental impact.
Open an account with Aspiration to get the best deal all around.?Aspiration is completely divested from bad ventures and completely invested in People and the Planet. And they pay you 100x more interest than the big banks for your checking deposits.
At Aspiration, you can earn up to 2.00% APY Interest on your entire balance, enjoy free ATM fees worldwide, and…hold on…your fees are your choice. Seriously.?You get to pick your own monthly fee, even if it?s zero.*
We tried it. Their online platform is simple and super user friendly.?And their customer service is excellent, as should be expected from a company that is invested in People.
3. Invest in your future and the future of the planet with just $50.
Now you too can be an impact investor and watch your money grow. Swell Investing is making impacting investing accessible to anyone.
We tried it and their platform is super easy (and fun) to use.??You can set up an account in a matter of minutes and cancel anytime you want.?You get to see the impact you are making on People and Planet daily, and track how much money you are making on their visual dashboard.
Unlike other investment options, Swell doesn?t have a bunch of middle men trying to take a piece of your money via high fees.?So vote with your values with only $50, by choosing what is most important to you!
You can choose to invest in:
4. Get rid of your bad debt.
If you?re paying high credit card interest, a personal loan may be right for you. There?s no reason to pay more than you have to. There’s a company in California that is taking a different spin on the personal loan market. Payoff has hired a team of financial experts, psychologists and technology professionals to help you feel good about your money choices. Plus, they have a marketplace of credit unions (not big banks) who underwrite the loans. That means better rates for you, and better treatment of people.?
It?s Your Turn To Be Heard
It?s time to take our power back from the banks. You can do this.?We are all worried about the future of our Planet and our People. And we are all concerned about our own financial future.?Now, you don?t have to choose. You can tackle both by making good financial choices.
By starting today, you can turn your worries into action that makes a difference for yourself and the communities and environment around you.?You Are Powerful. Your Decisions Matter. When You Speak, The World Listens.
*The Annual Percentage Yield ?(?APY?) associated with the Aspiration Summit Account is variable and accurate as of [January 2019]. Rates may be changed from time to time without notice.
All ATM withdrawal fees will be waived for your Aspiration Summit Account. In addition, your account will automatically be reimbursed for all ATM fees charged by other institutions while using an Aspiration Debit Card linked to your account at any ATM displaying the Mastercard?, Interlink?, Cirrus?, or Maestro? logos. The reimbursement will be credited to the account the same day the ATM fee is debited from the account. Please note, there is a foreign transaction fee of one percent that is not waived, which will be included in the amount charged to your account.
Aspiration Partners, Inc. and its affiliates are committed ?to “All Extra Services Provided at Cost,” meaning that we’ll only charge you what it costs us to provide the extra service (such as a wire transfer), and not a penny more. Besides these at-cost service charges, the only account fee you pay is the fee you choose, even if it?s $0, which is why we call it Pay What Is Fair.
Deposits are insured by the FDIC up to $250,000 per depositor. For more information about FDIC insurance coverage, please visit theFDIC website.
Exchange Traded Funds (ETFs) are a collection of assets. ?An Equity ETF, for example, holds a group of companies (stocks) in its portfolio. ?When you invest in an ETF, you own a piece of every single company that is held in that fund. ETFs are a great vehicle for reducing risk, since you?re invested in a group of companies instead of a single company.
That also makes ETFs a great vehicle for voting with your dollars at scale, across many companies. This is an opportunity to have greater impact. Investors have caught on and are now demanding more socially responsible ETF options.?Another thing that?s great about sustainable ETFs:? fund managers can use our collective voting power to encourage companies to align with our values. Companies love being included in ETFs since these vehicles bring capital, investor exposure and brand cache.
For example, the CEO of an up and coming sustainable ETF told us that they were going to meet with a large company to explain to them why the company didn?t make the cut to be included in their new women-focused ETF. While the would reconsider in 6 months, they simply didn’t qualify today because they did not meet the standards. You can see the power that socially responsible ETFs have in encouraging good change within companies.
So why consider ETFs? Let?s look at the benefits of ETFs over mutual funds.
Benefits of ETFs over Mutual Funds
1. Lower cost.
ETFs have a much lower expense ratio than mutual funds. The expense ratio is the annual fee that the fund company charges to run the fund. Let?s say you invest in a mutual fund with a 1% expense ratio. That means that you will be paying $10 for every $1,000 invested. The fee is taken from your investment in the fund, which means you don?t have to write a check ? it is done automatically on your behalf. Expense ratios are also difficult to find ? they are often buried in the fund prospectus. When investing in any type of fund (ETF or mutual fund), make sure you look at the expense ratio and performance first.
On average, ETF fees are 1/3 the price of a typical mutual fund. In addition, because they are following an index, their turnover is low (i.e. when companies come into / out of the ETF). That?s good news for investors. ETFs have ? the tax cost of the average mutual fund. (source: www.ishares.com)
2. Potential for Higher returns.?
Many people wonder if ETFs outperform mutual funds. You?d think that mutual funds would have higher returns since they are actively managed and have higher expense ratios. As it turns out, mutual funds are often more expensive and have lower performance than ETFs.
Crazy, right??After subtracting fees, only 18% of active mutual fund managersbeat their benchmark. ETFs are designed to mirror the holdings in their benchmark and therefore follow benchmark performance.?The iShares Core ETFs have outperformed their mutual fund peers 84% of the time over the last 5 years
3. Greater buying, trading, and pricing flexibility.
Mutual funds are only priced once per day. ?Which means you can only trade them once per day. ETFs, on the other hand, trade on an exchange just like a stock. That means you can trade them throughout the day, any time the exchange is open. This gives you, as an investor, greater flexibility, and control over the timing of your trades.
And because ETFs trade like stocks, you have the option to use stop and limit orders. Some ETFs even offer put and call options.
It seems investors are catching on to the benefits of ETFs v. mutual funds. ETFs are now a 3 trillion dollar industry.
But Watch Out.?Not all sustainable ETFs are equal.
We are in the early days of sustainable investing.
That means there is a huge variation in financial products. Both in ETFs and Mutual Funds. Some are doing deep integration of sustainability, while others are simply ?box ticking.?
This is dangerous because it could reflect that sustainable investing is underperforming when it?s not.
The current state of sustainable investing is similar to that of cryptocurrency. Everyone knows Bitcoin and Ethereum. But there are 900 cryptocurrencies and most of them are crap. The bad ones will give cryptocurrency a bad name.
The same thing applies to sustainability investing. Truly integrated sustainable investing is not box-ticking, and it?s not simply screening to exclude bad stocks (e.g. tobacco, firearms, fossil fuels.)
That?s why some mutual funds might be worth the extra cost of active portfolio management, even though they might have a higher expense ratio.
Bottom line: ?do your research. That means look at the constituents of the fund, the fund management team and the criteria used to include assets in the portfolio, in addition to performance over time and expense ratio.
A quick view of Socially Responsible ETFs
Following are the top 10 socially responsible ETFs, grouped by category.
Top 10 Socially Responsible ETFs by Expense Ratio
The expense ratio for the socially responsible funds ranges from 0.12% to 0.95%. Not bad. They are all under 1%. By comparison, mutual fund expense ratios range from .9% – 1.35%.
Top 10 ETFs by Environmental, Social and Governance Scores
Finally, let?s take a look at the top 10 socially responsible ETFs by ESG Scores. ESG (or Environmental, Social, and Governance) Scores measure the fund?s level of commitment to the socially responsible criteria. There are many ways to measure.
If you have a brokerage account, you can buy ETFs from within your account. For example, if you invest with Schwab, Fidelity, E*Trade, TD Ameritrade or any of the other online retail brokers, you simply enter the ticker symbol and buy the ETFs.
Some brokers are now offering commission-free trades for certain ETFs. That means you don?t pay a commission fee to buy or sell the ETF. However, we have not seen any socially responsible investing ETFs included in the commission free trade offers. That means you?ll be paying a commission fee to buy or sell the ETF. Commission typically range from $4.95 ? $6.95 per trade.
If you?d rather not pay a commission, you can open an account on the Robinhood Trading app. They offer commission free trades, even on ETFs. Bonus: ?Robinhood gives you a free stock when you open an account.
Or, get the benefits of mutual funds without the cost.
Another way to invest in sustainable companies is to use a robo advisor. We like Swell Investing. They are an impact investment platform offering a suite of sustainable companies. These portfolios are managed via a Separately Managed Account (SMA). You?legally own the companies listed in their portfolio. The fee is only 008% instead of the typical mutual fund range of 0.45% – 3.38%.
The benefit: you get the benefit of having an active portfolio manager choose the companies in the fund. The portfolio manager takes an integrated approach at determining which companies should come in and out based on carefully chosen impact criteria. And you get all this without the typical cost of a mutual fund.