Investing is the most effective way to build wealth in the long term, but data shows that women are investing less than men. This puts women at a financial disadvantage in building financial security and achieving their financial goals.
A study by the FINRA Investor Education Foundation highlighted the gender gap, finding that only 27% of female respondents have non-retirement investment accounts, compared to 43% of men.
Research points to several factors, including known issues like the income gap, in which American women typically earn 82 cents for every dollar earned by men. A lack of investing knowledge and confidence among women also contributes to this gap. Globally, as few as 1 in 10 women feel they fully understand investing, according to BNY research—and less than a third of women (28%) feel confident about investing.
There are also gender differences in the level of interest about investing. Recent Greenlight data shows that 61% of dads and boys say they’re interested in investing, compared to only 42% of moms and girls.
The gender gap begins early—and that’s where parents can come in. If parents prioritize their daughters’ investing education from a young age, they can help close the investing gap and set them up for a stronger financial future.
Parents can focus on piquing investing interest, building knowledge, and offering girls encouragement—which boys may be receiving at higher rates. Small behavioral differences like these early in life is what can lead to larger gaps over time, which is the theory of cumulative disadvantage. Here are actionable tips on how to help girls overcome the investing gender gap, starting as young as elementary school.
Piquing interest in investing
As soon as your daughter understands the basic concepts of money, like saving for the future, introduce the world of investing in a way that’s relevant to her daily life. For example, if she has a favorite company, explain that people who own stock in that company are part owners—and can share in the profits.
Explain the benefits of long-term investing and why it’s so advantageous to start early. Help her think about future goals in life and what boxes investing can check.
✅ Financial stability
✅ Financial goals
✅ Wealth accumulation
✅ Flexibility and control
Use an online investing calculator to show how money can grow through the power of compounding, in which money earns money. Investments can outpace inflation over regular saving, which means money will have more purchasing power over time instead of less.
Long-term investing can help your kids enjoy a sense of financial wellbeing throughout their life. In a recent Greenlight survey, 91% of kids and teens believe financial knowledge and skills are needed to achieve their life goals—and 94% of parents agree. Help your daughters set financial goals for the future, in addition to the essentials of having an emergency fund and retirement savings.
Build confidence
Women report less confidence in investing and lower risk tolerance than men. In fact, almost half of women (45%) in the BNY study said that investing money in the stock market is too risky for them. More education can help deepen knowledge, such as understanding the risk levels of different assets. Moms and daughters can even learn together!
Start with the investing basics
Common financial assets include company stock, bonds (interest-paying loans to companies or government) and pooled investment funds, including exchange-traded funds (ETFs) and mutual funds. Both ETFs and mutual funds are collections of assets like stocks and bonds. ETFs usually have lower fees and can be traded like stocks. They often track stock market indexes like the S&P 500, made up of 500 of the largest U.S. companies. For the last 20 years, the S&P 500’s annual returns averaged almost 10.5% before inflation.
Talk about risk
Emphasize how diversification reduces risk by spreading investments across different assets. Returns are the profit you make on your investments, which can include income (like dividends or interest), or capital gains (the increased value of the investment from your purchase price).
For parents who want to deepen their investing knowledge, there are many resources available to learn more. You can explore books, podcasts, online courses, websites, like Morningstar or Investopedia, and apps, such as Greenlight, where families can get investing recommendations for their kids based on risk tolerance and learn to invest together. You don’t have to be a Wall Street pro to start, and you can build your own investing confidence along the way.
Don’t let imposter syndrome fool you—research has shown that women make the best investors! Their returns average higher than men, who have a higher volume of buying and selling stocks. That’s attributed to overconfidence, making it clear that it’s all about finding the right balance.
Encourage investing
Show enthusiasm for learning about investing and let your daughters know how much you believe in their ability to reach their future financial goals. Research has shown that the perceptions of others can have an impact on participation in the stock market. Learning to invest at a young age sets the stage for a lifetime of smart financial decisions.
Putting knowledge into action will further build their confidence. Let them practice regularly setting aside money and investing, which is the most important lesson you can impart.
Consider opening a custodial investment account for your daughter. Fractional shares can be bought for as little as one dollar.
One common myth is that people need a lot of money to start investing, but starting small is better than starting later. Moms can help their daughters with one investment at a time, whether it’s from allowance or a birthday gift from a relative. You can gradually increase investments as knowledge and understanding grow.
As you research company stock and ETFs together, look at historical stock prices. Help them get comfortable with the ups and downs of the market, while noting the overall trends. Past performance doesn’t guarantee future results, but you can see how the stock market has gone up over time. Talk about continued investing throughout life, such as the benefits of opening a Roth IRA when they earn their first paycheck, and participating in an employer-sponsored retirement plan as soon as one is available. Investing is for the long term.
Model a mindset of continuous learning to make financial literacy a family tradition. By supporting your daughter’s head start in investing, you’re also helping to close the gender gap for the next generation.
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