As a result of the "money" gap, women are more financially vulnerable than men
Women still face a wealth disparity, compared to men.
Even as women achieve higher levels of education and attain more prominent positions in the workplace, the gender pay gap remains. For example, women are still more likely to take time out of the labor force or reduce the number of hours worked because of caretaking responsibilities. Referred to as the “motherhood penalty,” this often impacts a woman's career opportunities.
Stemming from the wealth gap, women often find themselves more financially precarious compared to men. According to a recent study by Fidelity Investments, a staggering 93% of women experience money-related stress, regardless of their household income. Further reports indicate that many women in the United States remain in unhealthy or dysfunctional marriages due to financial insecurities.
Even in healthy relationships, women typically outlive men. Consequently, women often need to manage finances independently at some point in their lives, but are often unprepared to do so.
Emergency funds to the rescue
For women, “financial stress is pretty consistent across all age groups and income,” said Lorna Kapusta, head of women and engagement at Fidelity.
However, simple money management strategies like emergency funds can alleviate that stress. Fidelity's research reveals a significant reduction in financial stress as women increase their emergency savings. Among those without any emergency savings, approximately 81% experienced moderate to high levels of stress.
But when women accumulate three months' worth of emergency funds, only 26% report elevated stress levels.
How to start building an emergency fund and cash reserve
Many financial experts advise setting aside at least three to six months' worth of expenses. If you are the sole breadwinner or self-employed, they recommend saving even more.
Lorna Kapusta, head of women and engagement at Fidelity, recommends creating a budget divided into three main categories. She advises allocating 50% of your income to essential expenses like rent, food, and utilities, 15% to retirement savings, and 5% to an emergency fund. The remaining 30% can be used for discretionary spending or to cushion against a higher cost of living.
If you can't meet these savings targets right away, Kapusta suggests starting by putting any amount into a high-yield account, many of which currently offer over 5% interest—the highest rate in nearly two decades—and gradually increasing your savings over time.
Additionally, she recommends contributing enough to your 401(k) to receive the full employer match and opting for auto-escalation, which will automatically increase your contributions annually.
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