41% of women don’t have emergency funds – here’s why it’s such a huge problem

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An emergency fund can help you stay afloat when you face a loss of income or a large unforeseen expense. Having an emergency fund is essential so that you don’t have to go into debt when these obstacles hit the road – yet many women do not. A recent Betterment survey found that 41% of women had no money set aside for an emergency, while only 28% of men said they had no emergency funds. In today’s “Financially Savvy Female” column, we chat with Kristen Carlisle, Managing Director of Betterment, why women run out of emergency savings, why it’s a problem and what women can do to build an emergency fund.

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Seventy-two percent of men have an emergency fund compared to only 59% of women. What are the possible reasons for this difference?

There is a huge schism between the way men and women save. Much talk about this has centered on the fact that women generally earn less than men – they earned around 82% of what their male counterparts earned in 2019, [according to] a 2021 census report. We also just saw that behaviorally, women tend to invest less in ancillary accounts compared to their male counterparts. Women actually tend to invest in retirement savings, but not at the same rate as men, and the theories behind this are also the theories around. [women’s] global approach to their finances – [they tend to be] much more conservative than men. They’ll go for some of the more traditional routes to spare vehicles, like a 401 (k) when it’s accessible, but when it comes to side accounts, like an emergency savings fund, they tend to be much less focused on it. So I think there are two factors – the pay disparity that occurs as well as the overall approach to financial stability.

The other thing that cannot be taken for granted is that we have seen a lot of women leave the workforce over the past two years. Almost 3.5 million women have left the workforce since the pandemic, so it is very difficult to put money aside for emergency savings when you are not receiving an income.

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Why is it vital for every woman to have an emergency fund?

Everyone should have an emergency fund, whatever your circumstances, and that’s really because life is unexpected. There are things happening that can cause financial disruption – pandemic or not pandemic – if you are a homeowner and have issues with your home, if you potentially want to invest in your home, if you have unforeseen medical expenses that arise. . Preparing for these unexpected life events is what is really critical.

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The most common [financial disruption] is unemployment, and this goes for expected and unexpected unemployment. You want to give yourself the breathing space of knowing that you will have flexibility if you choose to step down from your job or if you find yourself unemployed in the future. We see what is happening, that overall, women are leaving the labor market faster than men. Women are dropping out of the workforce to take care of their families and have to have some kind of financial support system behind them to have that flexibility. Having enough savings to cover you for three to six months of your essential costs gives you that flexibility and freedom. Based on what we’ve learned over the past couple of years, women in particular tend to be affected by these unexpected events, and it shows no signs of slowing down.

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What are the steps for women who do not have emergency funds to set up one?

1. Know how much you need to save. My biggest comment is just to spend some time looking at how you’ve spent. This gives you insight into how to set a goal for yourself based on your spending. Those three to six months are necessary living expenses – we’re not talking about subscriptions or anything like that. This is really the baseline to get you comfortable. Get to know this number. This is the first thing. Understand what it is before you start to feel overwhelmed by it.

2. Start small. It can still seem a little overwhelming if you look at this number and say to yourself, “Well, I can’t save it. It’s really easy to walk away and save nothing. What I always say is start with something, the smallest contribution you can make. Don’t worry about having to hit that number in a very short period of time and instead focus on, OK, if I look at my budget and spend a certain amount on coffee and a certain amount on subscriptions, might- Would I potentially take this budget and set aside some to start saving towards an emergency savings fund? Think of them as tactics to get you to your end goal. In many cases, you don’t even have to sacrifice the way you live today if you set aside $ 10, $ 15, $ 20 a week.

3. Automate contributions. I also encourage people to take some of the guesswork out of it – automate it. Automate your savings by siphoning off a little each month, each week from your existing accounts – whatever you can realistically afford. I would also look at the accounts that help you grow this over time. At Betterment, we have an automatic investing solution to make your money grow while you save. It helps you achieve your goal and make it less intimidating when looking at a large number in the barrel.

4. Increase contributions over time. When you can, start increasing [your savings contributions] slightly over time. Small percentages go a long way. If you get a raise, if you get a bonus, put it in a savings vehicle like an emergency savings account.

5. Continue to save as much as you can. Do not stop. When you hit three months, when you hit six months, keep going. It’s money set aside to make you feel comfortable and secure no matter what life throws at you, and that you can use so you don’t have to dip into funds intended for other things, like education or retirement, because those have tax implications and they’re not really meant for today or in the short term. Keep going as best you can and don’t be put off because every little bit counts. Every dollar that you put aside that counts, every dollar that you can save, helps you build some stability.

GOBankingRates wants to empower women to take control of their finances. According to the latest statistics, women hold $ 72 billion in private wealth, but fewer women than men consider themselves to be in “good” or “excellent” financial position. Women are less likely to invest and are more likely to take on debt, and women still earn less than men overall. Our “Financially Savvy Woman” column will explore the reasons for these inequalities and suggest solutions to change them. We believe financial equality starts with financial literacy, so we offer tools and advice for women, by women, to take control of their money and help them live richer lives.

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About the Author

Gabrielle joined GOBankingRates in 2017 and brings with her a decade of experience in the journalism industry. Prior to joining the team, she was a reporter for People Magazine and People.com. Her work has also appeared on E! Online, Us Weekly, Patch, Sweety High and Discover Los Angeles, and she was featured on “Good Morning America” ​​as a celebrity news expert.

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