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A couple weeks ago I found myself in an argument with a guy friend over how much cash I have in my emergency account. This friend told me to take out 30% of that money and put it into riskier investments, such as cryptocurrency and individual stocks.
As a solopreneur whose income drastically varies month to month, that advice was not only alarming, it also didn’t fit with my financial strategy and goals. Not only that, but as a woman, I always wondered if I should contribute more to my emergency fund than the three to six months that experts generally recommend.
When I reached out to financial experts to ask them if that was true, they agreed. Here are the four main reasons women need to save more cash than men in their emergency funds.
1. Women live longer
According to the World Health Organization, women live between six and eight years longer than men. And according to financial planner Carly Carbonaro, that fact alone can sometimes mean more financial complexities.
Because they are expected to live longer, Carbonaro says women should spend more time focusing on beefing up their savings in both their emergency and retirement funds.
“As women live longer lives, they may need to save for a retirement that lasts more than 30 years,” says Carbonaro. “Despite the fact that women are more likely to save, they fall behind in retirement savings because they are less likely to invest.”
The gender wage gap plays a role, too — women, and especially women of color, earn less in their lifetimes than men for the same roles, and so have less money to save and invest.
2. Women pay more for personal-care products
While it might not be something we think about often, financial planner Danielle Miura says that women are often paying more for personal-care products than men are on an everyday basis. According to a study by the New York City Department of Consumer Affairs, products marketed for women cost 7% more than similar products for men.
“In general, women pay more for skin products, hair products, personal-care products like razors and deodorant, and clothes,” says Miura.
In a time of financial crisis, women might have to turn to their emergency funds to pay for personal-care essentials, and pull more cash out of there than men would.
3. Emergency funds give women options
Financial planner Nicole Peterkin Morong says that women who are starting their own businesses need to save even more in their emergency funds than they might have thought to originally.
According to a WBENC report, 25% of women were likely to seek financing for their business and more women used credit cards versus equity investors to fund those businesses. Plus, 88% of women-owned businesses generate less than $100,000 in revenue.
These statistics are the reason Peterkin Morong urges women entrepreneurs to save more money in their emergency funds.
“Women are starting and running businesses at a faster clip than ever before, and in my experience it’s often out of necessity and without much, if any, cushion,” says Peterkin Morong. “That means higher interest paid on startup costs that are financed with higher-interest debt, more financial stress, and a higher likelihood that those businesses will fail because of lack of adequate runway to build.”
Peterkin Morong says a woman’s emergency fund can not only help in case of unexpected costs but it also gives them options.
“An emergency fund gives women the choice to switch careers or start businesses with a good foundation, or to stay home and have an extended maternity leave while they plan their next move,” says Peterkin Morong.
4. Women are often caregivers
According to a report from the National Alliance for Caregiving, women are 67% more likely to be a primary caregiver than men. Financial planner Lauren Wybar says that since women often take the caregiver role, whether to their own children or to eldery parents, it can create income gaps.
“When women are caregivers, they can step away from their career or miss out on peak earning years,” sas Wybar. “An emergency reserve — with a minimum three to six months’ worth of expenses — is a financial safe haven of sorts, allowing access to liquid funds during any short-term time away from a career.”
Plus, financial planner Jay Rishel says the pandemic made things even worse for women who left the workforce to become primary caregivers who were unable to attend schools or daycare.
“They still haven’t returned to the workforce in the same numbers that men have. This disruption makes the hill that much steeper for women who are saving for retirement,” says Rishel.