Saving money is saving money – it should be the same for men and women, right? Wrong. Sure, a return on a CD or a dividend rate on savings accounts is not gender-biased. However, the financial steps leading up to savings are very different for both men and women, and women typically have to work a little harder to not only manage their money, but to manage it better.
Why? Women live an average of seven years longer than men. This means they must save more money and live off their savings and investments. Women also typically earn less money than men. Even today, women earn just 75 to 80 percent of what men do. This means women have to budget better in order to have money to save.
Women are also more likely to drop out of the workforce than men. Women are typically cast in the role of “family caregiver” for raising children and caring for elderly relatives, thus making them less likely to qualify for a retirement plan such as a 401(k).
It’s imperative that women develop a personal budget. Sixty-five percent of expenses should be taken up by housing, food and utilities. Another 20% are generally used for clothing, recreation and household repairs. Ten percent should be budgeted for property taxes, insurance and tuition. The remaining five percent is for savings.
Look at savings as a bill, as most people have a difficult time paying themselves first before debts. Women in particular have a hard time saving, because they are concerned with providing for the family and putting themselves last.
When putting away five percent, women should look to CDs as they offer a higher rate of return than a savings account. Also, tax-deferred savings options like an IRA are smart moves for women.