By Kristin Messerli
In comparison with generations past, women are killing it when it comes to our finances. Single women account for the second largest segment of homebuyers today, doubling that of single men. By the end of the decade, women are expected to inherit a $30 trillion transfer of wealth, and the share of women in leadership positions across industries has increased significantly in recent years.
While the financial picture looks bright for NextGen women, recent findings indicate a huge disparity in financial behavior between women and men. In a report released in October 2020 by my team at Cultural Outreach, we surveyed 1,450 homebuyers, ages 22-37, and discovered a disheartening trend among young women. Women were significantly less likely than men to be contributing to any investment (other than homeownership), including retirement accounts and the stock market. Although women indicated that they have a “savings” mindset, they were less likely to contribute to a savings account by 104 percent in comparison to men.
Even when controlling for women with children, NextGen women had disproportionately high rates of financial stress and low self-confidence in their financial decisions. I have outlined a few of the potential reasons for this disparity, but these are complex issues that need greater attention from financial and mortgage professionals in order to effectively bridge this gap for future generations.
Risk Tolerance
There are countless studies demonstrating that women tend to be more risk averse in all areas of their lives, including finances. According to a BlackRock survey of 4,000 Americans, women held a greater share of low-risk investments. NextGen women homebuyers were no different. Our female respondents were 247 percent less likely to contribute to investment accounts and 129 percent less likely to contribute to their retirement.
While there are many hypotheses as to why women are more risk averse, women have historically also held less assets, therefore requiring a more cautious approach. However, our research indicates that financial literacy, economic pressures, and childhood experiences are major contributors to risk tolerance and financial outcomes.
Financial Literacy and Self-Confidence
NextGen women were less confident than men in their initial knowledge of homebuying and expressed primary fears of being taken advantage of and not having a trusted advisor. Consistent with other studies, McKinsey research also reported lower levels of confidence in financial decisions among women. This research indicates a strong need for financial advisors and housing professionals to increase financial education and trust among this growing segment of homebuyers.
