Do Women Face Different Personal Finance Challenges Than Men?

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Every once in a while I like to step outside my comfort zone (consumer credit) and tackle an issue that intrigues me, like this one. In the spirit of full disclosure, I don’t know squat about women’s financial issues. What I do know is how to enlist the help of someone who does, and then lean on her heavily for insight, which is exactly what I did here. Last week I ran into my pal and personal finance expert Manisha Thakor and bent her ear on the subject.  Enjoy!

Do women have materially different personal finance issues to deal with than men?

“Surprisingly – yes. While the technical basics of personal finance are essentially gender neutral, it is extra vital for women to act on them early and often given the different life headwinds they currently face as compared to men.  Additionally, as the enduring success of pop psychology books like “Men Are From Mars, Women are from Venus” by John Gray or more academic works such as “You Just Don’t Understand: Men and Women In Conversation” by Deborah Tannen demonstrate – men and women can see the same financial information (or pitch) and interpret it differently. Historically, the financial services industry has been run by males for males.

Women want to really to have their long term goals understood and a strong sense of how the financial plan will get them there. By contrast (and of course this is a broad generalization) men tend to be more transactionally oriented and convert more quickly. So guess who advisors focus on more?”

Exactly what issues do women face that men don’t?

* Women live longer – an average of 5 to 7 years (according to the CDC)

* Women earn less – still $.77 on the male dollar (according to the Census Bureau)

* Women spend an average of 11.5 fewer years than men in the paid workforce, opting out to care for children and/or elderly parents (according to the Women’s Institute for a Secure Retirement).

Stir all that together and you’ve got a pretty toxic cocktail.

To illustrate, let’s compare the retirement saving experience of Joe vs. Jane

Joe starts saving $5,000 a year at age 25 (10% of a $50,000 salary). Joe saves this same amount annually until age 70 and earns an average compound annual return over that time of 6% by investing in a balanced mix of low-cost stock and bond mutual funds.

At age 70, Joe has a retirement nest egg of $1,063,717.

Now, let’s look at Jane. Jane also starts saving 10% of her salary at age 25. Alas, Jane only makes 77% of what Joe does so her contribution is $3,850. Jane keeps this up until age 30. Jane then takes 11 years (rounding here…) out of the paid workforce to raise her kids. At age 41 she re-enters the work world and once again begins saving $3,850 a year until age 70. Both the retirement money she saved pre- and post- children grow at 6% a year on average.

At age 70, Jane has a nest egg of $506,742.  Or said slightly differently…

Jane has 1/2 of the nest egg that Joe does as a result of “The 77/11 Effect.”

When it comes to personal credit, do women play an equal role as men?

I asked this knowing that women are listed as “authorized users” on credit cards much more often than men.  According to Thakor…

“From my experience talking with women (I’ve yet to find a rigorous study to back this observation up) women over the age of 40 (of which I am one!) have not been as aware about the importance of establishing a strong… and LONG… credit history.  Part of this may have been because credit scores in decades past were not as widely used as they are today – in terms of setting everything from insurance premiums to determining whether or not a landlord will rent to you.

By contrast, women in their 20s and 30s I’ve observed are MUCH more savvy about credit scores than I had expected.  Alas, I’ve observed a lot of this knowledge has been gleaned in the school of hard knocks – often through racking up credit card debt in college without fully understanding the repercussions… and then having to dig themselves out of the hole. This is not to beat up on women; men are not saints either when it comes to responsible use of credit cards over the past few decades. But I have noticed this interesting age gap between knowledge level and interest around credit cards.

And finally…

In a divorce, how does a woman’s journey to re-establishing personal credit differ that that of a man (if any)?

“This is a fascinating question and one where the Credit Card Act of 2009 may be creating some unintended negative repercussions for newly divorced women – especially those who had worked in the home prior to the divorce. The more stringent rules regarding current earning history when it comes to procuring new credit often makes it harder on women than men post-divorce… unless they continued to work and ideally also maintain at least one credit card in their name during the marriage.

This is amplified by the tendency for men’s standards of living to rise post-divorce while women’s decrease materially… making them look to lenders as even less attractive candidates for credit.  As a result, I believe while it’s vital for both men and women to have a solid grasp on the basics of personal finance I am concerned that women have less wiggle room for error due to these “life headwinds.” That’s why I focus my work primarily around raising awareness for women’s economic empowerment.”

Thanks to Manisha for the generous amount of time she spent with me for this piece.

John Ulzheimer is the President of Consumer Education at, the credit blogger for, and a contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and, John is the only recognized credit expert who actually comes from the credit industry. The opinions expressed in his articles are his and not of or Intuit. Follow John on Twitter.



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