Why the Final Wave of Feminism Will Have Everything to do with Money

Ladies, what is the final hurdle to our being equal with men?

One word: money.

If we’re not financially equal with men, we’re not equal with men. It’s that simple.

And we’re working on it. There is lots of attention around the gender pay gap. (Note to trolls: there is a gender pay gap. The research here is clear. And if women close it, it doesn’t in any way negatively impact the guys. In fact, women earning more money can grow the economy.)

The money gap we don’t talk much about is the gender investing gap. Except to trot out 1958-style myths: like women aren’t as good at math as men (not true); women don’t have that much money anyway (um, women control $5 trillion of investable assets); women need more financial education before they can invest (red herring alert: so do men, but it doesn’t keep them from investing); the gender investing gap isn’t all that important as compared to the earnings gap (even if this were the case, so what?).

The fault certainly lies with the investing industry, which does a much better job today for men than for women. In fact, if you were build a business specifically geared toward men, wouldn’t you load on the sports and betting analogies – like “beating the market,” “picking winners,” “outperforming”? Wouldn’t you choose symbols like the bull as your industry icon?

That said, the responsibility also lies with us as individuals. This may be because we do a poor job of recognizing the cost to us not investing, and it feels like something we can put off (you know, after we are more financially educated). But if we make $85,000 a year, save 20% of that and leave it in the bank – over 40 years, that can cost us a total of anywhere from $1 million to $1.8 [1]

Maybe those numbers are of a size that they feel amorphous and sort of meaningless to you. How about this? We estimate that waiting 10 years to invest can cost you about $100 a day; waiting five years can cost the equivalent of $50 a day.[2]

So let me ask you a question: if you had a hole in your purse and money was falling out of it – that $100 a day…even that $50 a day – how long would it take you to fix it? A day? A week? At most.

(Oh, and trolls: closing this gender investing gap is also good for everyone. If women were to invest just 5% of the $5 trillion of investable assets they control into the markets, that means an additional $250 billion available to fund companies’ growth.)

Solving the gender investing gap is why I am launching Ellevest, a digital investment platform for women. Our goal is to rethink investing in a way that works better for us, complete with taking into account our longer lives, our greater risk awareness and our greater planning orientation; we even forecast a woman’s projected salary, customized to her education level.

And for those of you who reflexively believe that “for women” means “pink it and shrink it”? We have four patents pending that say it’s not.

Take a look. You can request an invitation here.

You can hear more about the platform and watch the other part of our video interview here.

Sallie Krawcheck is the Co-Founder and CEO of Ellevest, a digital investment platform for women. For information about Ellevest, a Securities and Exchange Commission (SEC) registered investment adviser and its financial advisory services, please visit the firm’s website(www.ellevest.com) or the SEC’s Investment Adviser Public Disclosure website (www.adviserinfo.sec.gov).

(Photo: Flickr, Tax Credit)

Disclosure:

[1] We compare the outcomes of saving 20% of an $85,000 starting salary for 40 years in a savings account with the outcomes associated with investing those savings in an Ellevest account. We assume the savings account yields a 1% average annual cash return and has no account fees. For investing, we assume an investment with Ellevest using a low-cost diversified portfolio of ETFs beginning at 91% equity and gradually becoming more conservative during the last 20 years, settling at 56% equity by the end of the 40 year horizon.  These results are determined using a Monte Carlo simulation—a forward looking, computer-based calculation in which we run portfolios and savings rates through hundreds of different economic scenarios to determine a range of possible outcomes. The lower end of the range reflects a 70% likelihood of achieving the amount shown or better, and the higher end of the range reflects a 50% likelihood of achieving the amount shown or better. Both amounts include the impact of Ellevest fees, inflation, and taxes on interest, dividends and realized capital gains. 

[2] We compare the wealth outcomes for a woman who begins investing at age 30 with one who began investing at age 35 and another who began investing at age 40 after having saved in a bank for 5 and 10 years, respectively.  All women began with an $85,000 salary at age 30 and all salaries were projected using a women specific salary curve from Morningstar Investment Management LLC, a registered investment adviser and subsidiary of Morningstar, Inc., which includes the impact of inflation. We assume all women save 20% of salary each year.  

The bank account assumes an average annual yield of 1% and a 17% tax rate on the interest earned, with no account fees. The investment account assumes an investment with Ellevest using a low-cost diversified portfolio of ETFs beginning at 91% equity and gradually becoming more conservative during the last 20 years, settling at 56% equity by the end of the 40 year horizon.  These results are determined using a Monte Carlo simulation—a forward looking, computer-based calculation in which we run portfolios and savings rates through hundreds of different economic scenarios to determine a range of possible outcomes. The results reflect a 70% likelihood of achieving the amounts shown or better, and include the impact of Ellevest fees, inflation, and taxes on interest, dividends, and realized capital gains. To determine the cost per day, we divided the calculated cost of waiting 5 and 10 years to invest, by the number of days in each period.

All opinions and views constitute our judgments as of the date of writing and are subject to change at any time without notice.

Information was obtained from third party sources, which we believe to be reliable but not guaranteed for accuracy or completeness. The information provided should not be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice.

The information provided does not take into account the specific objectives, financial situation or particular needs of any specific person.

Investing entails risk including the possible loss of principal and there is no assurance that the investment will provide positive performance over any period of time.