There are many injustices when it comes to money and opportunities for women and BIPOC. Many of them are embedded in the system, like the pink tax; a lot are based on systemic bias, for example, women don’t get a raise as often as men despite asking as frequently; and some of them are perpetuated based on historical norms and outdated thinking, like teaching daughters to save but sons to invest. 

Learn more about hindrances to women’s financial health in my TikTok video.

Women’s financial wellbeing continues to be more perilous than men’s for all of these reasons and more. This is exacerbated for women of color. According to a Principal Foundation study, about a quarter of white women are financially secure, whereas only 11% of black women and just 7% of Latina women are. 

While it may all seem like doom and gloom, there are some things women can do to change their financial trajectory. 

Develop Financial Literacy

This is the foundation and the starting point to building and growing wealth. Financial literacy includes understanding your income and expenses, having a handle on your budget so as to avoid (or minimize) high interest debt, building up savings, knowing your credit score, saving and investing for retirement, and protecting yourself and loved ones (such as with correct documentation, insurance, and beneficiary designations). 

Be Careful how much Cash you have on Hand

Having too little in highly liquid assets, like checking and savings accounts, can be problematic when the unexpected happens, such a losing a job, needing an expensive repair, or facing a large medical bill.

On the other hand, having too much cash on hand, which tends to be more of an issue for women according to Kellie Weir, has other implications, namely missing out on money growth via investments, dividends, and interest coupon payments. Too much money in cash, especially in times of high inflation such as we’re having right now, means your cash is fundamentally losing value. 

Fidelity writes that, “More than half of women have $20,000 or more sitting in cash; more than one-third of women have $50,000 or more in cash. Not only is cash missing out on potential growth, but it isn't even keeping up with inflation.”

Since individual circumstances vary, there are a number of ways to figure out how much cash to keep on hand. Some experts suggest having at least 5% of your net worth in cash, while others recommend having between 6-24 months worth of living expenses. 

Don’t be Afraid to Invest

According to research by both Ellevest and FINRA, just over a third of women feel confident investing and are doing so, compared to somewhere between half to two-thirds of men. Furthermore, since women have lower levels of confidence when it comes to investing, they tend to leave too much cash on the sidelines or choose too conservative of investments that won’t ensure they reach their financial goals. 

There is some bright news. When women do invest, it tends to come with good results. A number of studies have found that women’s portfolios tend to outperform men’s by at least 0.4%. A study by Swedish brokerage firm Avanza, found that among their 1.7M account holders, women’s investments performed twice as well as men’s, yielding on average 10% return, compared with men’s 4%. 

It’s time to break the old notion that women aren’t good with money and aren’t meant to invest. Start with the basics: spending less than you earn, building up a savings cushion, clearing high interest debt, and investing, even if it’s only $10 a month. Even better, invest in something that’s meaningful to you.

While it can be easy to delegate, defer, and delay when it comes to money, don’t let that become your default approach. You can take action!

Not sure where to start? Book a consultation to begin your journey to financial wellbeing.