Women, on average, have less saved than men, with women having an average of $54,000 saved compared to $62,000 for men, according to the latest stats. A new survey suggests that one overlooked habit may be widening this gap.
A recent Vanguard survey found that women are less likely than men to use high-yielding savings options, with only 26% of women utilizing these accounts compared to 14% of men. Additionally, more women reported not fully understanding how inflation impacts savings rates, with 66% of women versus 58% of men lacking this understanding.
In a “Financially Savvy Female” column, Sonia Fraher, head of cash and savings at Vanguard, discusses why women are underutilizing high-yield savings accounts. She explains that many women may not consider using these options if they are offered by an investment firm because they do not see themselves as “investors.” Additionally, studies have shown that women have lower confidence in their financial literacy than men, making high-yield savings options feel overwhelming.
One key factor contributing to both men and women not leveraging high-yield savings options is habit and inertia. Many consumers are comfortable with their traditional savings accounts and may not realize the need to make a change to ensure they are earning the returns they deserve on their savings.
It is crucial to understand how inflation impacts savings and the importance of earning an annual percentage yield (APY) greater than the rate of inflation. Without this understanding, individuals may feel content with a traditional bank savings account offering an average rate of 0.39%, unaware that their savings are actually losing value.
In conclusion, women can benefit from creating a savings strategy that includes high-yield savings options and a thorough understanding of how inflation affects their savings. By breaking the habit of sticking to traditional savings accounts and taking proactive steps to increase their savings rates, women can bridge the gap and secure their financial futures.
