To mark the start of Women’s History Month, Fidelity has released a new study revealing certain saving and investing behaviors that stand out among younger women who are making strides in breaking down financial boundaries.
According to the firm’s 2022 Money Moves Study, women currently ages 18-35 years old are starting to invest nearly a decade earlier than women ages 36 and older. On average, this younger generation of women started investing in a brokerage account at age 21, compared with age 30 for older women who started to invest during the same age frame.
Beyond opening a brokerage account by age 21, Fidelity’s study shows that younger women also opened a retirement account even earlier, at age 20, compared with their older peers who opened one at age 34.
Not surprisingly, the pandemic has caused many people to reevaluate their finances and in the case for some younger women, this was the time to start investing with 50% reporting they have started to invest in the past six months, or they plan to do so in the next six months. Meanwhile, when women age 36+ reflect on their biggest financial mistakes, with 36% saying they waited too long to start saving for retirement—the most common regret cited.
For illustrative purposes, Fidelity offers an example of the power of compounding by comparing a person starting to invest at age 25 to a person starting at age 40. With each person contributing $50 per month, by age 67, the person who started earlier will have accumulated approximately $144,000 compared with the person starting 15 years later with $46,000, assuming a hypothetical 7% annual rate of return.
Graphic: Business Wire
Investing with Purpose
When asked what they are most proud of with respect to their finances, younger women (43%) more so than women ages 36+ (34%) are proud of the actions they are taking that will better the future, whether making a difference at large, or helping themselves and their families.
Fidelity’s customer data shows that women are directing a higher portion of their contributions into sustainable investment products, aligning their investments to themes shaped by environmental, social and governance (ESG) factors.
In addition, more than a third (35%) of younger women say they started investing with a small amount of money to get comfortable first, which is also consistent across generations. In fact, 46% of all study respondents say any amount of money is okay to begin investing, the important thing is to start.
“We continue to see more women than ever investing outside of retirement accounts—in fact, our research shows more than two-thirds are doing so—and that momentum is being driven by the next generation who is redefining what it means to ‘invest like a woman,’” says Lorna Kapusta, Head of Women Investors & Customer Engagement at Fidelity Investments. “That means starting early, starting small and staying focused on goals that align with what’s important to them.”
Moving Past the Barriers
Challenges remain, however. Fidelity also looked at the impact the pandemic has had on women’s total well-being. Particularly for women with caregiving responsibilities, they are feeling overworked and overwhelmed, causing many to step away from the workforce.
According to the study, 30% of women report a transition in their careers in the next six months—whether changing jobs, reentering the workforce or leaving the workforce. And for many, a career break or job change may also mean an interruption in saving and investing for retirement or other financial goals, the firm notes.
Additionally, 58% of all women report that pandemic is influencing the way they think about money and make financial decisions. What’s more, Fidelity reports that there are still other factors holding back the next generation of women from investing more money, including that they think they can’t afford it (26%) and that investing is risky (20%).
“We’re amid a major shift where more women are talking about money and investing—it’s getting less and less taboo, especially among this younger generation,” added Kapusta. “More female influencers are sharing their financial experiences and tips on social media; more circles of women are talking money and goals with their friends; and our recent study even finds one in three young women agree that their parents talked to them about the importance of investing for their futures when they were young.”
The findings are based on a national online survey conducted in December 2021 by ENGINE Insights among 2,015 adults, who own a listed investment account other than checking and savings. Fidelity was not identified as the sponsor of the study.
