Man Eating Woman

1 month ago
7 Min Read
1348 Words

Interesting stat from Australia collected by Finder:

On average, men have $36,004 invested in shares, compared to just $9884 for women and they also have a higher ratio of shares to savings than women, with 74 per cent as opposed to 29 per cent. source

They say "just" in the article with regard to the amount in shares, but the ratio between shares to savings is the interesting part. While there is a lot of talk about income disparity and the like, I think that it is also good to consider other aspects of the equation.

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For example, with 74% in shares, that means that in total, the men in the sample have about 48,000 dollars collected between shares and savings. Women with 29% in shares however, have a far lower total of 32,000 dollars worth. That is a massive gap where men have 50% more than women. However, This means that the men have about 12,000 dollars in the bank, while the women have about 22,000 dollars in savings. Meaning that women out save men almost 11:6.

But, what kind of difference does it have over time, for example ten years?

Let's use the quick and dirty Rules of 72, which I love! It is a way to work out compound interest in the head and I think everyone should learn it.

Years to Double= 72/Interest rate

This means that we can work out in our head a rough calculation of how long it takes an amount to double. For example, if the average interest rate was 5% - it would be 72/5 = 14.4 years. So, at 5% interest rate, 1000 dollars today would be 2000 dollars in 14.4 years from now.

Assuming the average ROI of the shares is 10%, if we put 10,000 dollars in, it would take 7.2 years to become 20,000 dollars. Now, most people don't put in 10,000 dollars at a time, so this is added to incrementally, but over the space of the 7.2 years, large gains can be made. However, putting the same away into a savings account will see what?

Well, with the interest rates as they are, savings accounts return close enough to zero interest to make a difference and not only that, the return is so far below the inflation rates, that having money in the bank is literally costing about 4% a year - meaning that if you saved 1000 dollars today, in a year from now it would have the same buying value as 960 dollars today. 40 dollars is a lot to lose, especially considering that the 1000 dollars invested into a 10% ROI vehicle, would see a 100 dollar gain and ~56 dollars once inflation adjusted.

So, over the space of the 7.2 years, the difference is obviously enormous. This has profound impacts on personal finances too, as while it might feel good to have that liquid savings on hand, every time it is needed, it is eating into a capital that is already shrinking. Having "enough" liquid on hand offers a similar security for most things but the majority of the total is working at generating income in the background.

It isn't often that a person in Australia suddenly needs 12 thousand dollars cash, but it is even rarer that a person needs 22 thousand. However, in the exceptional circumstances that it might be needed, shares are generally pretty close to liquid anyway, which means that they can be liquidated to make up the shortfall quickly.

Now, the next aspect in this is the observed gender differences when it comes to risk aversion, with many studies over the years showing that women are more risk averse. What this could mean (I have no visibility on this) is that not only are men willing to risk more in generative activities over savings, but they are also putting their money into higher risk assets, meaning they are also opening themselves up to higher return. This means that for example, instead of getting a 10% return on the 3/4 of their wealth in shares, they may be getting on average a 15% return.

With the law of 72, that means that 1000 invested today would double in 4.8 years - which is obviously a massive difference in outcome and if invested for a total of 10 years, that would see a 400% gain on the initial capital. Again, these ROI numbers are pulled from thin air, but they are just to demonstrate the differences.

While a thousand dollars in ten years will end up as 4000. Even at the higher risk, 300 dollars will only end up at 1200 dollars - so there would be a 2800 dollar shortfall over the space of ten years. Start extrapolating that out to larger numbers over the space of say 40 years, and the differences are monumental.

What this means is that at least partly due to risk aversion, the lost potential is absolutely enormous and has severe impacts on life consequences - even though at every step of the way, women might have more "in the bank" than men. This not only affects the individual though, since economies are run on investments, where we spend our money matters and it means that women have less voice in the direction of investment capital.

Now, the interesting thing here is that even with pay equality (not an argument I want to get into please), due to investment habits, the men on average would still be getting "paid more" as they will be using a greater percentage of their income to generate income streams that widen over time. This then leads to equality again, as pretty soon, it is again the "rich old men" with the money who dictate capital flows and who gets what, even if indirectly.

Another 5 per cent have moved some of their savings into cryptocurrency. Finder’s data shows the average Australian has $904 in cryptocurrency and $259 in micro-investing apps – the equivalent to 3 per cent and 1 per cent of what they have in savings.

this is also interesting and while it doesn't mention it, it would be good to know what the demographics of this 5% are also, as they are likely (in my opinion) on average, going to outperform all of the other investments combined over the next decade. This means that even if they hold the 3% there, that could essentially generate double the ROI of the other 97% of their total - if they invested all of the other 97%.

With the early adopter advantage in play, if the average early adopter and early majority investor is male, they are going to get inflated gains in respect to those who come after, who are more likely to be female. This means that going forward, not only will the wealth gaps widen, but even in the same populations the gender wealth gap will widen as well, creating a whole host of other issues too.

Now, this piece isn't about some ridiculous battle of the sexes, it is about financial literacy and the consideration for all of us as to whether what we are doing is in our own best interest, or in the interest of our society. I would far prefer see a greater representation of the entire world affecting the economy, but in order to do that, requires people learning about how options and how they behave in the economy now.

If we aren't willing to risk what we have in terms of our wealth, the economy is going to punish us through our ability to generate more wealth. This means that we will increasingly have less to invest, while those who take even the slightest of risks will have an increasing stake and draw on the pull, and the power to direct more their way.

This is something to consider for all of us.

If you want a better world - own the one you have first.

[ Gen1: Hive ]

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