The Gender Wealth Gap and How FinTech Can Address It
Image credit: The LilySingle women own ~32% of the wealth that single men do. For single women of color, this gap is more like a chasm - median wealth is just $200 for single black women. $100 for single Latinas. Compare that, for a second, to single white men, who have a median wealth of $28,900. (numbers from this report)
If you’re like me, these numbers shock you. They make you think, “why is that?” and they get you interested in doing something about it.
Personally, I’m interested in fintech. I work closely with startups all the time that are improving financial health, and I am always interested in hearing about new solutions to the seemingly endless stream of problems in creating a more economically equitable society. I’m biased toward action, so I didn’t want to just ponder on this problem and think up policy solutions (none of my friends are politically motivated enough to run on this platform anyway!).
I wanted to talk about solutions to the problem that could be developed sooner rather than later. I wanted to help someone who was building something to change this. I wanted to talk about fintech.
Lucky me, I had just met a couple badass fintech founders.
So I decided to put together a #realtalk on the gender wealth gap, how fintech can help, and invite them to join. I brought together 10 people from very different backgrounds - from the head of a family office to a student entrepreneur, from corporate finance professionals to VC experts. For those interested in racial/gender breakdown: 70% women, 30% men, 30% from first generation immigrant families, 50% western European, 10% Black, 10% Latinx, 10% East Asian, 10% South Asian, 10% Eastern European.
These were the big problems and some of the specific solutions we started to talk through. Are they exhaustive? No. Are they even close? No. Are they interesting? Hell yes. I thought I’d share them with you.
Lower wages: We all know this one, When compared to white, non-Hispanic men, women make 79 cents on the dollar overall; but it is only 65 cents for Native Hawaiian and Pacific Islander women, 64 cents for African American women, 59 cents for American Indian and Alaskan native women, and 54 cents for Latina women. What are some specific ways we can overcome this gap?
Possible Solution 1: increase wage transparency. Earnings discussions with employers are notoriously one-sided because employees have little information on what others are making - regardless of gender. In-app access to average salary ranges for position and company (maybe pulled from Blind or Glass Door) would give users great insight into what is actually normal for a position.
Possible Solution 2: basics of negotiation. The podcast This is Uncomfortable put together a great episode (F You, Pay Me), with a session at the end of negotiation basics with a professional negotiator. Including some of these lessons (and testing them through push quizzes like Babbel) would be a way to help teach those skills and to make sure they stick.
Child- and home-care burden: Women are twice as likely as men to be working part-time because of care-giving and home-making responsibilities. How do we help women access meaningful/high-wage part-time work, access benefits similar to those gained through full-time employment, or start to balance the workload in the home?
Possible Solution 1: aggregate high-wage contract/part-time work on a platform, or link to one that is already doing this! UpWork, Fiverr, etc. are all filled with great opportunities to do work from home if you have the right skillset.
Possible Solution 2: help women access work benefits from nontraditional or part-time employment. Groups like Vivi are starting to aggregate work opportunities through their platforms and provide benefits based on hours worked. Those benefits can make a critical difference in the costs women face that men aren’t exposed to (reproductive health costs, more frequent cancer screenings, etc)
Possible Solution 3: conversations in the home are often unbalanced. Offer some kind of template for conversations in the home that have proven to be helpful in delineating responsibilities, or offer some kind of "ten things to work out before moving in together" type of guides. The best way to overcome the burden of unequal work is to equalize it in the first place!
Style of financial education: When we look at how women are taught about finances early on in life (generally) girls are taught how to save where boys are taught how to build wealth. 61% of boys got a lesson from their parents about credit scores by high school, compared with 46% of girls. Boys were also more likely to be taught how to pay taxes, open bank accounts, use credit cards, and learn about investing.
Possible Solution 1: contextualize the future of a financial decision. Financial literacy has been proven to have poor results when not paired with immediate contextualization. So, if you have a personal financial management app, why not show the range of potential futures associated with different decisions? If someone sets up an auto-deposit to a savings account of $50/month, project the difference between that and a money market account. A CD. An average-performing robo-advisor like Betterment or Wealthfront.
Possible Solution 2: create a fake portfolio. Investing is one of those things that seems super crazy and opaque until you start doing it. So de-risk it entirely by giving a pretend $1,000 to invest. Provide the option for users to “buy” stocks at the current price, and then track them over time. Update them, occasionally, about how their “portfolio” is performing. Just helping someone get more familiar with the possibilities can make a huge difference.
Possible Solution 3: prompt conversations among the family. In our little group, male relatives or romantic partners were the main source of investment education. It wasn’t universal, but having an app prod users to hold uncomfortable conversations might actually be a great way to help people learn.
Cyclical Spending Habits: Spending changes based on a whole wide range of different criteria - including your mood, the time of the year, and all sorts of things… one of the things you might not think about is that your spending changes along with your hormonal cycle. I hadn’t heard this before, but some preliminary research suggests it’s true. A member of our discussion group who is fastidious about her spending and has tracked it for the past 11 years on a spreadsheet tested this out after doubting it when she heard it. Her spending spiked considerably based on her monthly cycle.
Possible Solution 1: Time your advice to coincide with cycles. Provide notes to say “this is one of your more spendy days of the month, try to evaluate your purchase decisions a little more closely to meet your savings goals!”
This overview isn’t meant to be exhaustive (it’s hardly a good beginning!) but I did find it interesting and thought that may of you might be interested to read as well. I hope this sparks some thoughts with you - and if you feel like sharing, I hope you do so in the comments!
I’m going to be putting together more talks like this. I’ll post similarly oversimplified overviews of what we talked about. If you’re here in the city (or you’re planning to come by) let me know if you have an idea for a topic. Let’s have a #realtalk.
