The Truth About Women and Debt

Spending cuts, pandemic unemployment, and lack of maternity leave are compounding women's already heavy student debt burden. Here's what we can do to create a level debt playing field.

In media and popular culture, women are often pegged as the household shopaholic—buying shoes, clothes, and other luxuries that stretch family budgets. But while it's true that women do drive the majority of consumer spending in the household, the reality is they're not shopping just for fun; they're carrying the mental and financial load of making sure the home and family run smoothly, whether that's buying the kids' school supplies or a replacement toaster when the old one is on the fritz.

In fact, three recent reports have shown that women's relationship with debt isn't about frivolous spending at all. Instead, spending cuts, pandemic unemployment, and lack of maternity leave are compounding women's already heavy student debt burden. We spoke with money Coach Nika Booth from DebtFree Gonna Be about the realities of gender and debt in 2021—plus what we can all do today to create a level debt playing field for women and girls.

Personal debt is a feminist issue.

A 2020 study by Sara Reis of the United Kingdom's University of Sheffield Political Economy Research Institute was titled "Personal Debt is a Feminist Issue," because, well, it is. Income reductions from public spending cuts and unemployment have disproportionately impacted women. According to the study, by 2020-21, women suffered 86 percent of cuts to tax and social security benefits. And who are the most affected? Single mothers, women with disabilities, and Black and other POC women, the study explains.

Here in the United States, the trends are only slightly different. Disproportionately high student loan debt, unpaid family leave, and low wages among women in the U.S. are three primary pillars that raise the female debt burden so much higher than that of men.

Paid leave and child care are critical infrastructure.

In the United States, according to the American Association of University Women, "The percentage of women in the labor force is the lowest it's been in more than 30 years. [...] Many women cannot return to the workforce without holistically addressing the economic needs of families."

The org's research found that the pandemic has truly hit working moms hard (no surprise there). The AAUW's findings state that, in addition, women have not benefited from the same rate of job recovery since early 2020 as men. By April of 2021, 1.5 million moms still had not returned to the workforce and "over half of mothers who left their jobs during the pandemic reportedly did so because their child's school or daycare closed," the AAUW states. "And those women who are returning to the workforce are predominately looking for work (97 percent) while most men who are returning are already employed (88 percent)."

Women shouldn't need disability insurance as a stopgap for unpaid maternity leave.

A July 2021 study from the online insurance broker Breeze surveyed 1,000 women who recently went on unpaid maternity leave. The findings were heartbreaking.

"For women who went on unpaid maternity leave without disability insurance, 20 percent dug into savings to cover costs, 17 percent took on credit card debt, 11 percent took on a side job, and 9 percent took out a personal loan," the study notes. "Just 11 percent said they could still cover costs comfortably. For that same group, unpaid maternity leave forced 34 percent to delay paying off student debt, 32 percent delayed buying a home, 26 percent delayed building a retirement fund, and 29 percent delayed buying a car. Amongst the women who took out disability insurance prior to unpaid maternity leave, 65 percent said it provided adequate financial coverage."

While disability insurance can be a beneficial stopgap, it is not a permanent solution. Even this service comes at a cost—sometimes hundreds of dollars per year—that is exclusively passed on to moms, not dads.

Take these three steps to level the debt playing field today.

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Acknowledge that there is a "pink tax."

After suffering from depression, Nika Booth got serious about getting out of her six-figure debt burden. She started documenting her debt-free journey on social media as Debt Free Gonnabe. This personal quest turned into a personal finance community and coaching business, helping thousands of people take control of their finances and get out of debt. She reminds women that the pay gap and debt burden are aggravated by the so-called "pink tax," the popular name for gender-based price hikes.

"Women earn a fraction of what men make. As a result, women pursue higher education, and subsequently more student debt, in an effort to increase their earning potential and close this gap, to no avail. Additionally, women pay more for items like clothes and personal care, such as razors, shampoo, and feminine care/menstruation products and the applicable sales tax," Booth says. "All of these minimize the amount of disposable income needed to save, pay off debt, and invest to build wealth."

The first step? Recognize that those lower-priced gray razors function just as well as the pricey pink ones. The same goes for shampoo, lotion, and other body care products that are needlessly upsold to women. Institutions and public spaces could go a step further to provide feminine hygiene products for free in restrooms—as with hand soap and toilet tissue—rather than charging per piece in vending machines.

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Teach women and girls about financial literacy.

Bank of America recently released new data from its "Preferred Insights: Hindsight is 20/20" personal finance report that explores the financial attitudes of 2,000 affluent Americans. The results showed that women were less likely to be taught about finance and investing topics by their parents. Forty-one percent of women (vs. 51 percent of men) said they were taught how to invest and save for retirement, 27 percent (vs. 45 percent of men) learned how to make good decisions when there is a market downturn, and 26 percent (vs. 40 percent of men) learned how to find a financial advisor.

Yet, a recent Credit Karma study found that "nearly two-thirds of women believe that equal pay will happen in their lifetime." The study also found that almost 1 in 5 (19 percent) of millennial women surveyed are now debt-free—compared to 13 percent in a similar 2010 survey. Also according to Credit Karma, one-third of women are investing today (up from 16 percent in 2010) and about half of millennial women surveyed are saving for retirement (up from about 22 percent in 2010).

This optimism and momentum should only expand with better information sources and higher financial returns—and it underlines just how important it is to continue the work of democratizing financial literacy information to empower women and girls to make well-informed financial decisions for themselves and their families.

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Encourage all men to be allies.

Booth says that men can be change-makers too—by acknowledging their privilege to advocate for equal pay for women. "This doesn't just look like encouraging their workplace to be transparent about salaries or being transparent about their own earnings," she says. "It can also look like encouraging discussions about the gender pay gap among family and friends and holding space for the women in their lives to share their experiences. There's empowerment in having open and honest discussions that I believe help to bring about change." Fathers, brothers, friends, and partners can encourage and help the women in their lives to establish an emergency fund of three to six months of expenses. Having a healthy savings cushion could help prevent minor problems from ballooning into large-scale and long-lasting debt.

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