personal finance  |  march 11, 2025

Five important actions that can help women build financial security

How to help protect your family from financial disruptions.

 

Key Insights

  • Plan for the “what ifs” to guard against financial disruptions.

  • Funding emergency reserves and having adequate life and disability insurance can help to support the family.

  • A lifetime earnings gap is most prevalent with women who alter their careers to take care of others.

Judith Ward, CFP®

Thought Leadership Director

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Women face a number of gender-specific risks when it comes to money. In addition to the disparity in paychecks, there is a far more significant lifetime earnings gap that is most prevalent among women who leave the workforce or alter their careers to raise children or to be primary caregivers for a spouse or an aging parent.

Life events and financial shocks—such as divorce, disability, unemployment, and widowhood—can wreak havoc on even the best-laid plans. This is especially true in situations where a woman is a full-time parent or caregiver who relies on someone else to financially support the household.

Planning for the “what ifs”

  • Emergency reserves: We suggest having savings that can cover three to six months of expenses in an easily accessible account. In a household with a primary earner, leaning toward the higher end—an amount that can cover six months of expenses—is a good idea. Should the primary earner become unemployed, the household is better prepared to weather this period of uncertainty without having to scramble to find other sources of income or consider drastic cuts in spending.

  • Insurance: Make sure the primary earner has enough life and disability insurance to support the family should something happen. After all, that’s the income the household is relying on. At the same time, consider the insurance needed to replace the contribution of an at-home spouse who doesn’t earn a paycheck. There definitely would be costs associated with certain household activities if they had to be outsourced.

  • Family finances: In some households, there might be a division of labor. One spouse may be responsible for the day-to-day tasks—paying the bills, balancing the checkbook, and managing schedules. The other spouse may be responsible for overseeing the investment and retirement accounts. It’s extremely important that both spouses understand the financial position of the entire household—what is owned and what is owed. What are the household debts? What are the savings and investments that are intended to help achieve future goals, and how is the family tracking to meet those goals?

  • Investment acumen: Whether spouses are dividing and conquering or relying on their partner to support the household, building financial acumen is a necessity. Women should learn and practice how to save and invest, learn the lingo, and gain experience by opening their own savings and investing accounts. A spousal individual retirement account (IRA) may be a great place to start for women with little or no income of their own. Monitoring their credit history is another good idea. If they would ever need to support themselves, they’d be ahead of the curve.

  • Earning potential: When women leave the workforce to care for children or an aging parent, they may be at home during their peak earning years. This career gap may make it difficult to reenter the workforce. Women may want to consider keeping a foot in the door. Part-time, contractual, or consulting work not only will contribute to the household, it will help keep their skills sharp and future hiring prospects brighter. Volunteering is one way to maintain professional skills, and engaging in supportive networks is also helpful. Additionally, continuing education to advance a future career can be extremely rewarding. If a woman finds herself in a situation where she has sole financial responsibility, she will have the confidence to make the most of potential opportunities.

Taking these five actions can help every woman be better prepared for the unexpected—and protect her family from financial disruptions. And for women who have left the workforce and rely on a primary earner, these tips are essential in helping to provide greater financial peace of mind.

Important Information

This material is provided for informational purposes only and is not intended to be investment advice or a recommendation to take any particular investment action.

The views contained herein are those of the authors as of February 2025 and are subject to change without notice; these views may differ from those of other T. Rowe Price associates.

This information is not intended to reflect a current or past recommendation concerning investments, investment strategies, or account types; advice of any kind; or a solicitation of an offer to buy or sell any securities or investment services. The opinions and commentary provided do not take into account the investment objectives or financial situation of any particular investor or class of investor. Please consider your own circumstances before making an investment decision.

Information contained herein is based upon sources we consider to be reliable; we do not, however, guarantee its accuracy. Actual future outcomes may differ materially from any estimates or forward-looking statements provided.

Performance quoted represents past performance, which is not a guarantee or a reliable indicator of future results. All investments are subject to market risk, including the possible loss of principal. All charts and tables are shown for illustrative purposes only.

T. Rowe Price Investment Services, Inc., distributor. T. Rowe Price Associates, Inc., investment adviser. T. Rowe Price Investment Services, Inc., and T. Rowe Price Associates, Inc., are affiliated companies.

View investment professional background on FINRA's BrokerCheck.

202503-4272047

 

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