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A couple of weeks ago I found myself arguing with a young friend about how much money I had in my emergency account. This friend told me to take 30% of this money and invest it in riskier investments, such as cryptocurrencies and individual stocks.
As a solo entrepreneur whose income varies wildly from month to month, not only was this advice annoying, but it also didn’t fit into my financial strategy and goals. Not only that, but as a woman, I’ve always wondered if I should contribute more to my work emergency fund The three to six months that experts generally recommend.
When I reached out to financial experts to ask if this was true, they agreed. Here are the four main reasons why women need to save more money than men for their emergency funds.
1. Women live longer
according to World Health OrganizationWomen live between six and eight years longer than men. According to the financial plan Carly CarbonaroThis fact alone can sometimes mean more financial complications.
Because they are expected to live longer, Carbonaro says women should spend more time focusing on increasing their savings in both emergency and retirement funds.
“As women live longer, they may need to save for a retirement that lasts more than 30 years,” Carbonaro says. “Despite the fact that women are more likely to save, they delay retirement savings because they are less likely to invest.”
The The gender pay gap It plays a role too – women, especially women of color, earn less in their lives than men in the same roles, and therefore have less money to save and invest.
2. Women pay more for personal care products
While it might not be something we think about much, a financial planner Daniel Miura He says that women often pay more for personal care products than men on a daily basis. According to a study conducted by New York City Department of Consumer AffairsProducts marketed to women cost 7% more than similar products for men.
“In general, women pay more for skin products, hair products, and personal care products like razors, deodorant, and clothing,” Miura says.
In a time of financial crisis, women may have to turn to emergency funds to pay for personal care essentials, withdrawing more money than men.
3. Emergency funds give women options
financial planner Nicole Peterkin Murong She says women who start their own businesses need to save more emergency money than they originally thought.
according to WBENC . Report, 25% of women were more likely to seek financing for their businesses, and more women used credit cards versus equity investors to finance that business. Additionally, 88% of women-owned businesses generate less than $100,000 in revenue.
These statistics are the reason Peterkin Murong is urging women entrepreneurs to put more money into their emergency funds.
“Women are starting and running businesses more quickly than ever before, and in my experience, often out of necessity and without much, if any,,” says Peterkin Morong. “This means higher interest paid on start-up costs that are financed with high-interest debt, more financial stress, and a greater likelihood of these companies failing due to the lack of a suitable runway to build.”
Peterkin Murong says a woman’s emergency fund can not only help with unexpected costs but also give her options.
“The emergency fund gives women the option to switch careers or start businesses on a good footing, or to stay home and take extended maternity leave while they plan their next step,” says Peterkin Morong.
4. Women are often the caregivers
According to a report from National Alliance for CaregivingWomen are 67% more likely than men to be primary caregivers. financial planner Lauren Webar She says that because women often take on the role of caregiver, whether for their children or elderly parents, this can create income gaps.
“When women are caregivers, they can walk away from their careers or miss the peak of their earning years,” Sass Webar. “The emergency reserve — with at least three to six months of expenses — is a financial safe haven of sorts, allowing access to liquid funds during any short-term period away from the profession.”
Plus a financial planner Jay Richelle He says the pandemic has made matters worse for women who have left the workforce to become primary caregivers unable to attend school or nursery school.
“They still haven’t returned to the workforce in the same numbers as men,” Richel says. “This disruption makes the hill even more severe for women who are saving for retirement.”