Banking on Equality: Why women’s savings often get shortchanged

SAVING money can be a challenge for many, but for women, it often comes with additional hurdles. While financial planning and savings are crucial for everyone, certain systemic and societal factors make it particularly challenging for women to build a stronger savings account.

Take for example the United States, for many women, saving money poses a significant challenge. According to CNBC, New York Life’s Wealth Watch survey revealed that in 2022, women saved an average of just $3,146 annually, compared to $7,007 saved by men.

This discrepancy highlights key factors affecting women's financial savings. Are Malaysian women experiencing similar challenges? Let’s explore why women face these difficulties both in the States and Malaysia.

Wage Disparity

A major reason women save less is the ongoing wage gap. In 2021, women in the U.S. earned just 84 per cent of what men made, according to the US Census Bureau, which limits their savings potential.

Additionally, women experience a ‘motherhood penalty,’ with earnings dropping significantly after having children. A Census Bureau study found that women in opposite-sex couples earn about $25,100 less than men after their first child, with this gap widening post-childbirth, highlighting the financial strain of parenting.

Similarly, in Malaysia, women face significant challenges with saving money due to a persistent wage gap. Women typically earn less than men for the same work, impacting their ability to save. Despite advancements in gender equality, women still encounter salary and career advancement disparities, resulting in less disposable income for savings, even with similar qualifications and experience.

Lack of Paid Parental Leave

In Malaysia, many women experience career interruptions due to maternity leave or caregiving responsibilities, which can hinder their earning potential and career advancement. These breaks often result in fewer years of full-time work, impacting long-term savings and retirement benefits.

Additionally, women are more likely to work part-time jobs, which typically offer lower pay and fewer benefits, further complicating their financial stability. Not only that, but it also reduces their Employers Provident Fund (EPF) retirement contributions.

In the US, the lack of paid parental leave adds to the financial strain on women. CNBC reports that only 35 per cent of US organisations offered paid maternity leave in 2022, down from 53 per cent in 2020, according to the World Economic Forum.

This shortage forces many women to take extended breaks from work to care for newborns, impacting their ability to contribute to retirement accounts like 401(k)s or individual retirement accounts (IRA). The US Chamber of Commerce found that 32 per cent of women who leave the workforce to care for young children never return, further reducing their time to build retirement savings.

Longer Life Expectancy

It is estimated that women live a higher average life expectancy at 74.2 years compared to 69.8 years for men. The longevity means women are likely to spend more years in retirement, leading to greater financial challenges if their savings are insufficient.

Women face higher risks of not meeting their retirement income targets due to their longer lifespans. A study found that a woman retiring at age 65 in Asia has a 15 per cent shortfall risk, indicating their failure to achieve a desired income replacement rate during retirement.

This risk is exacerbated further by potential career breaks for family responsibilities, which can lead to lower lifetime earnings, savings, and retirement contributions.

In the US, women are expected to live to 79 years, compared to 72 years for men, according to the Population Reference Bureau. This seven-year gap requires women to save more for retirement—an extra $280,000 if annual spending is $40,000. Unfortunately, the TIAA Institute found that women, on average, retire with about 30 per cent less savings than men.

Student Loan Debt

Student loan debt is another significant obstacle. The Education Data Initiative reports that women with bachelor’s degrees borrow 4.27 per cent more in student loans than men, with the gap wider among associate degree holders. Additionally, 41 per cent of undergraduate women take on loans, compared to 35 per cent of men, leading to higher monthly payments and hindering their ability to save.

Lower wages, career breaks, limited parental leave, longer life expectancy, and higher student debt all make saving money more challenging for women. Societal expectations and gender norms also play a role, with women often prioritising family expenses over personal savings and facing pressure to spend on lifestyle and appearance-related products.

Based on reports over the past five years, Malaysia’s student debt has been rising to dangerous levels. As of September 2022, approximately 3.7 million students (both men and women) borrowed a total of RM67.69 billion to finance their education via the Perbadanan Tabung Pendidikan Tinggi Nasional (PTPTN). They then enter the workforce earning low salaries, with about half of borrowers reporting irregular incomes or earnings below RM2,000 monthly leading to difficulties in repaying loans.

Fortunately, a study indicated that female fresh graduates in the country tend to manage their debts more effectively than their male counterparts, suggesting women may possess better financial skills that can influence their ability to handle student loans and other debts.

Educate Yourself for the Future

Addressing these challenges requires various approaches including boosting financial literacy, advocating for equal pay, and supporting better work-life balance policies in the country. With the right support and strategies, women can build a solid financial foundation and overcome historical barriers to saving.

To learn how to manage your finances effectively, join ‘She Leads 4: Don’t Go Broke in Your Golden Years’ on Aug 27. This event focuses on the unique financial challenges women face, such as debt, family responsibilities, and career breaks, and offers practical strategies for overcoming these hurdles.

Featured speakers include EPF Head of Policy & Strategy Balqais Yusoff, Maybank Trustees Bhd Chief Executive Officer Nor Fazlina Ghouse, and a renowned financial and wealth planner Erin Adlina Adnan. The panel will also cover the importance of wills and trusts for protecting assets and securing financial legacies.

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