Women's Saving and Investing: Is Your Money "Girl Money?"

Photo: 401k

When I lived in New York and made less than a public school teacher in Idaho, one of my guy friends would often offer to pay for lunch since, as he jokingly put it, I only had “girl money.” It was the first time I’d heard the term, but I never forgot it. I was perplexed. I mean, money was money. What did being a girl have to do with it?

A few years later, when I began working in the finance industry, the concept of “girl money” came up again. Countless capable, intelligent women would insist they “knew nothing about money.” Professional women earning over six figures a year turned to mush when confronted with mutual fund prospectuses and portfolio illustrations. These were individuals I knew to be smart, successful, and certainly capable of decision making. In some ways, these women still viewed their six figure salaries as “girl money” — luckily, most of them cared enough to educate themselves on the best ways to save and invest their cash. (See also: Why Women Don't Negotiate)

Professional women earn more today than they ever have. Understanding how to save and invest those earnings not only makes financial sense, but helps women become more independent and confident overall. Everyone starts somewhere, and there’s often a learning curve. Below are a few tips and ideas on saving and investing to get started on the right path.

Savings: Pay Yourself First

If Cyndi Lauper was right and girls just want to have fun, it’s probably going to take some cash to make that fun happen. You work hard for a paycheck, so make yourself a priority in your budget.

  • Set up a direct deposit from your paycheck to a savings account each pay period, for whatever you can reasonably afford.
  • Women live longer than men, and therefore need more retirement savings. Contribute to your 401(k) plan at work, especially if your employer offers matching contributions. Freelancers and contractors can contribute to Roth or traditional IRAs.
  • Keep an emergency savings fund, preferably in an account that earns even a tiny bit of interest. Two to six months of expenses is recommended, depending on your comfort level.
  • Pay down credit cards after you’ve socked away money in the bank. While it’s true the interest rates on credit cards can cost you, without a savings account, you’ll be reaching for plastic every time there’s an emergency, creating a vicious cycle of debt.

Investing: Men Are From Mars, Women Are From Venus

Research has shown that men and women approach the concept of saving and investing money very differently, in part because they’re hardwired to think differently. For women, this works very much in our favor. Men tend to be emotionally driven when it comes to investing and are comfortable with more risk. Women trade less (which equates to fewer trading fees) and tend to be risk averse.

Whether you’re just starting to invest or want to increase your financial literacy, the following investment tips make sense for female investors.

  • Don’t get intimidated. Everyone starts somewhere. It’s okay to not know the difference between stocks, bonds, and mutual funds at first.
  • Consider values-based investing if you’re not sure where to start. Investing With Your Values offers some great tips. 
  • Trust your instincts. If you aren't comfortable with an investment or it seems too risky, hold off until you've done more research. It takes a lot longer to recoup losses from a bad investment than people realize.
  • Ask for help. Women in general seem to be much better about this than men, similar to asking for directions. Confused about a particular stock? Have a question about bonds? Consider calling a Certified Financial Planner (CFP) for advice. Or better yet, network with contacts to find a CFP who might offer some advice for free.

This post is a part of Women's Money Week 2012. For more posts about saving and investing, see womensmoneyweek.com.

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Elizabeth Lang's picture

Great post! I think the tip about trusting your instinct is a good one. The worst thing in the world is when you don't follow your gut, and it later turns out your instinct was right.

Erin C. O'Neil's picture

Thank you! On instinct, you're completely right- that's a hard lesson, but a valuable one to learn.

Meg Favreau's picture

I never heard the term "girl money" before this -- so condescending.

Erin C. O'Neil's picture

I know. The worst part is, I don't even think he understood how it came across. It was certainly motivational in ways he probably never intended, though!

Tara Struyk's picture

Nice post. I haven't heard the term "girl money" but I'm certainly aware of the concept. Women may think about money (and a lot of things) in their own way, but the advice in terms of how we should be handling it is the same. And frankly, the notion that we're somehow genetically debilitated when it comes to making money really makes my blood boil! Thanks for the perspective and sound advice:-)

Erin C. O'Neil's picture

Hey Tara - Yeah, it's funny how there's this stereotype about women not knowing how to make money, yet recent studies have proven we're actually more "genetically suited" to saving money than our male counterparts. Women tend to buy and hold and be less emotional on investing...guys tend to be more aggressive. In the end from what I've read, one gender doesn't end up making more than the other - it's actually pretty much dead even, just with different investment styles.

And yeah, it makes my blood boil too. I think it's changing for the better, though.