5 reasons why women benefit from investing
There are five reasons why women should invest – most of them are structural ones and some of them are specific to Germany. Let me quickly summarize them for you:
1. Overcoming the gender pay gap
On average, women in Germany continue to earn 21% less income that their male counterparts. The picture does not look very differently in other European countries. Why is that so? In general, women work in less lucrative industries, they often work part-time, or take breaks from work. Not only that, they are more often than mean prone to take so called EUR 450 jobs – part-time jobs that do not require them to pay into the public retirement fund – with dire consequences later on.
2. Mitigating the financial impact resulting from breaks from work
I already mentioned that women are more likely to take breaks from (paid) work. On average, this amounts to 5 years. Let’s assume that your annual salary before taxes is EUR 60.000 – and now multiply this by this time span. For 5 years that you are off (paid) work, you have incurred an income loss of EUR 300.000 – impacting not even your ability to save parts of it, or even better, to invest it! As long as the work you do while taking such breaks is not financially remunerated in some form (for example, via an agreement with your partner that he/ she will make retirement contributions for you, that parts of the joint money is to be invested by you for yourself), you are losing out.
3. Remedying the effects of a 40% divorce rate
Helma Sick, one of the icons of financial advice for women, published a book titled “Ein Mann ist keine Altersvorsorge” (“A man is not an old age provision”). After all, 40% of all marriages in Germany end in a divorce. If you as a woman worked less during this time for various reasons, you have an issue. And need to offset the time you did earn money by investing later on.
4. Tackling inflation
The current inflation rate amounts to approximately 1.6%. This will help you visualize this fact: the EUR 100 that you own today will be worth EUR 98 in a year. If you leave your money in your savings account at 0.0-0.5% interest rates, and given the inflation effect, you will lose money. A lot of people are not aware of this effect, but it greatly impacts your ability to grow your wealth.
5. Ensuring a happy retirement phase
The gender pay gap also affects the retirement payments women receive: in comparison to the monthly payment of EUR 1.037 that their male counterparts will receive, women in Germany have access to EUR 618. This is a gap of 57%. Note that women live longer (88 years in Germany versus 83 years of men). To overcome this effect, women need to invest and ensure themselves that they will have access to enough money later on.
It is never too late to start investing – and to help you better understand the world of investing, we created Finelles.
Written by Caroline-Lucie Ulbrich
Finelles Founder. Coach and organizational consultant (ECB, Deutsche Bank and UBS).