Why Millennial Women Have a Money Problem

Kimberly Palmer
June 17, 2014

You've probably heard that by midlife, women tend to earn less than men and also have less money saved up. That's not entirely shocking, given that many women opt to scale back their own career ambitions in order to take care of children or parents. What is surprising, though, is just how financially behind 20-something women are compared to their male peers.

Consider these findings from the 2014 Wells Fargo Millennial Study released last week: College-educated millennial women, who are currently between ages 22 and 33, earn just $63,000 compared to men the same age, who are already bringing in an average of $83,000. Millennial men have also already accumulated higher levels of investable assets: $58,500 versus $31,400.

[Read: The Truth Behind Gen Y's Financial Optimism.]

On more subjective measures, like how they feel about money, men also rank higher. Millennial women say they are less satisfied and less optimistic about their finances than millennial men, and they are also less likely to call themselves "savers." In addition, women are more likely to report feeling "overwhelmed" with the amount of debt that they carry.

The study of 1,639 millennials raises some disturbing questions about 20-something women and their financial futures. Why are young women -- who have been raised to believe they can do anything -- already falling behind their male peers, even before the midlife crunch period when they might scale back careers for family priorities? And are they creating disparities that will only deepen with age and end up haunting them their whole lives?

Even financial experts have a hard time explaining the reasons behind the gender difference, which is at least partially due to the types of majors and careers women choose to pursue. One thing is clear, though: It's alarming. "The saving disparities that are there are a little distressing for women," says Karen Wimbish, director of retail retirement at Wells Fargo.

She points out that men also appear to be more confident in the stock market, with 69 percent of millennial men calling it the best place to invest, compared to just 49 percent of millennial women. If women avoid investing in the stock market in their 20s, that could negatively impact the growth of their retirement investments over their lives.

"A fear of the stock market is really concerning," Wimbish says, adding that millennials are repeating generations-old gender patterns. "The millennial women are just like their mothers and grandmothers," she says, meaning they are more risk-averse than millennial men.

[See: 11 Money Tips for Women.]

Cindy Hounsell, president of WISER, the Women's Institute for a Secure Retirement, says she wants all young women to know that the most important thing they can do for their financial futures is to start saving early. The Wells Fargo study found only half of millennial women are saving for retirement already, compared with 61 percent of men.

"This is a generation that really needs to do what they're supposed to do from an early age on or the system isn't going to work for them," she says, referring to the fact that few people have pensions these days and Social Security payouts could be lower, particularly for those who retire early. "We want people preparing for their longevity and saving for their future paycheck."

It's a message Wimbish emphasizes, too. She says employers can offer auto-enrollment and auto-escalation programs to help encourage millennials to save more and start early. Millennials often realize that the earlier they start, the more money they will have for retirement, Wimbish says, but actually taking the steps to divert income into a retirement savings account can be challenging.

[Read: Where Are the Female Financial Planners?]

For women in particular, hearing more about financial planning and investing at a young age could help, too. The Certified Financial Planner Board of Standards recently found that just 23 percent of CFP professionals are women, a fact the board attributes partly to the greater exposure boys and young men get to financial planning and investing information. Parents can help by talking about saving and investing to their children at an early age and setting an example through their own money behavior, too.

Hear that, ladies? Don't just save and invest for your own retirement, but talk about what you're doing with your daughters, and let them look over your shoulder as you manage accounts. Their own financial futures might depend on it.

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