Women feel less prepared to weather a recession than men. Here’s why

Fears of a recession are high in the U.S., but women are experiencing those fears more acutely.

Women are not only more worried than men (74 percent vs. 65 percent) about a looming recession, but they are significantly more likely (48 percent) than men (34 percent) to say they feel financially unprepared to weather an economic downturn if one were to strike before the end of the year, according to recent Bankrate data. That’s compared to 41 percent of Americans overall.

The concern is even more pronounced for women of color. Half of Black women and 54 percent of Hispanic women feel unprepared to weather a recession, compared to 44 percent of their white counterparts.

Those feelings reflect the economic inequalities women — especially women of color — face in the U.S., according to Tiffany Ford, a postdoctoral fellow at the Brookings Institution. It’s harder for women to pay off debt, build emergency savings and invest for retirement due to pay disparities, differences in caregiving responsibilities and more — ultimately affecting their ability to weather an economic downturn.

“It’s beyond just a feeling,” Ford said. “The individual-level worry that the survey captures reflects systematic inequality. Women have less money coming in, and the money they do have coming in has to go farther. All gender inequalities are also racialized.”

Key insights on women’s recession preparedness

For women, financial gaps stoke their recession fears

Women continue to face higher degrees of financial fragility than their male counterparts, despite progress in recent decades.

Women continue to face gender wage gaps throughout their careers and less access to business funding. For women of color and mothers, the wage gaps are even steeper. Those pay gaps follow women into retirement: As a result of lower lifetime earnings, they don’t have as much opportunity to build wealth for themselves. It also makes paying down debt, from credit cards to student loans, more challenging.

Additionally, women disproportionately shoulder the responsibility of caring for children, relatives or aging parents — forcing many to juggle household and workplace duties, or leave the workforce altogether. Around 40 percent of women are the sole or primary breadwinners in U.S. households with children, according to a 2019 report by the Center for American Progress.

“Women tend to broadly take caregiving breaks more often than men do,” said Shang Saavedra, a personal finance expert and founder of Save My Cents. “This could be caring for children as well as caring for other sick people or other adults needing help in their families. That can then result in a lifetime of less earnings.”

The COVID-19 pandemic laid bare — and exacerbated — those financial gaps. When the pandemic struck in the spring of 2020, roughly 3.5 million mothers with school-age children either lost jobs, took leaves of absence or left the labor market altogether, according to an analysis by the Census Bureau. Though women have largely returned to the workforce since, their absence from the labor market reduced their earnings then and in the future.

“The past few years have been tough, particularly on Black women,” said Sallie Krawcheck, CEO of Ellevest. “The pay gap was already closing at only a glacial pace, of course, but the pandemic just made it … worse. A lot worse.”

With less money coming in, more money going out and inflation and rising interest rates stoking the flames of inequity, a potential recession only raises the stakes. 20 percent of women say they’re not at all prepared for a downturn, should one strike before the end of 2023, compared with 14 percent of men.

With recession preparedness unequal, it’s no surprise that women are more worried than men (74 percent versus 65 percent) about a possible economic downturn.

“For those women, among others, who have lower incomes, fewer savings and higher levels of debt (including those taking on more debt), increased financial stress is a virtually inevitable outcome,” said Mark Hamrick, Bankrate’s senior industry analyst.

Generally, women feel more stressed by money than men. A Bankrate survey last year found more than 2 in 5 women (or 46 percent) say money negatively impacts their mental health, compared to just 38 percent of men. 60 percent of women who say money negatively impacts their mental health are concerned about having enough emergency savings, and 59 percent are worried about paying for everyday expenses. Just 53 percent of men whose mental health is negatively impacted by money pointed to these concerns.

Women disproportionately struggle to save for emergencies and retirement

The economy is in an uncertain place, and it’s impacting how Americans can save for emergencies. But women are faring worse than men.

Only 37 percent of women would tap savings for an emergency expense of $1,000 or more, while 50 percent of men said they would do so, according to a 2023 Bankrate survey. Additionally, women (22 percent) are less likely than men (30 percent) to have added to emergency savings over the past year.

For women with little to no savings, N’Jie-Konte suggests prioritizing building a nest egg, even if you have debt. She suggests starting small — putting aside $5 a day can make a significant difference over time. “We can do more than one thing at a time,” N’Jie-Konte said. “At least get your emergency savings to a month of expenses, and from there, you can be more aggressive with your debt.”

Women are also more likely to have accumulated less wealth. Households led by women have just 55 cents in median wealth for every dollar owned by households headed by men, according to 2021 data from the St. Louis Fed. A 2022 Bankrate survey found that 62 percent of women are behind on their retirement savings compared to 48 percent of men. This includes 41 percent who are significantly behind compared to 30 percent of men. Also, 28 percent of women weren’t contributing to their retirement savings in the last year compared to 21 percent of men.

“These stats don’t live by themselves — they are part of an economy that’s becoming more and more unequal,” Krawcheck said.

Women are deeper in debt amid economic uncertainty

Several factors beyond women’s control — from the gender pay gap and caregiver burdens to their disproportionate student debt balances — compound their debt burden. Working women earn 82 cents for every dollar a man earns, making meeting any loan obligations challenging.

A 2023 survey by Bankrate shows that 40 percent of women are likely to have more credit card debt than emergency savings — compared to 32 percent of men.

Additionally, 27 percent of women would put a surprise expense on a credit card and pay it off over time, whereas only 22 percent of men would. Saavedra said that could be tied to the fact that women drive the majority of purchasing decisions for the household.

“If a household carries more credit card debt, you’re likely to see more of a balance on the female credit card holder,” Saveedra said. “I don’t think that necessarily indicates a gender difference in debt behavior.”

Still, it’s not optimal “at a time when credit card interest rates are the highest we’ve seen, consistent with the rising interest rate environment,” Hamrick said. The average credit card charges a record-high of nearly 20 percent.

Women also hold roughly two-thirds of all student loan debt in the nation, according to an analysis from the American Association of University Women. Women are more likely to have bigger student debt balances and sizable monthly student loan payments, even though they make 26 percent less than their male counterparts. Women also take two years longer than men to pay off their loans, and many delay financial milestones because of their student loan debt. A 2022 Bankrate survey found that female borrowers (30 percent) are more likely than male borrowers (25 percent) to have delayed saving for emergencies because of student loans.

For women struggling with debt, Anna N’Jie-Konte, CFP and founder of Dare to Dream Planning, recommends reassessing your budget and making a plan to chip away at it. Try to prioritize paying off high-interest debt, such as credit card debt. At the same time — if you have wiggle room in your budget — set up recurring deposits to a high-yield savings account and keep investing a little bit out of every paycheck if you can.

“There are two things I tell every woman to do: invest as much as they can as early as possible in their career,” N’Jie-Konte said. “I’d say a very close second is managing your expenses and having intentionality around that.”

Inflation and rising interest rates are hitting women harder

Americans are feeling the pain of higher prices at every turn, but because women have less earnings, savings and wealth, experts say inflation is hurting them more.

“This is one of the key reasons that women’s financial health has been under so much pressure,” Krawcheck said.

Simultaneously, interest rates have been rising as Fed policymakers try to slow inflation, making borrowing more expensive for everyone. Less than six months ago, 60 percent of women said the state of the economy was negatively impacting their quality of life, compared to 53 percent of men. Since then, inflation has barely budged, and interest rates have only increased, which has had a ripple effect on women’s ability to save in recent months. A 2023 Bankrate survey found that women (54 percent) are more likely than men (43 percent) to save less for emergencies due to rising interest rates.

“Women are already systematically doing more with less. That’s baseline,” Ford said. “When you raise the cost of living through inflation and higher interest rates, you’ll see those already on edge fall over.”

Women are taking steps to better their finances

Women are making a lot of the right moves financially, regardless of systemic barriers and uncertainty in the economy.

They continue to invest in their retirement portfolios, which N’Jie-Konte refers to as the “ticket to financial freedom.” According to a September 2022 survey, 55 percent of women either increased their retirement contributions or contributed about the same as they did the year prior. Another Bankrate survey found that 50 percent of women are spending less on discretionary spending in anticipation of a recession, compared to 44 percent of men.

Staying the course in investing has been a winning strategy in past economic downturns, experts say. Federal Reserve Economic Data shows that the stock market rises over time.

“It’s looking like women are positioning themselves well to ride out this tumultuous period and come out on top,” Krawcheck said. “Also not for nothing: Women investors tend to invest more and post better returns — by as much as a percentage point annually.”

There’s also “tremendous opportunity” for women in the workforce or investing in higher education or trade school with an eye toward eventual employment, Hamrick said. Women suffered greater job losses in the beginning of the pandemic, but most women — especially college-educated women — have returned to the labor market nearly three years later.

In fact, a recent analysis from Pew research shows there are more women ages 25 and older with a bachelor’s degree or more education in the labor force than men. Additionally, the unemployment rate fell from 3.5 percent to 3.4 percent in January, the lowest since May 1969.

“The job market has remained remarkably strong and resilient,” Hamrick said. “The number of job openings remains high, reflecting strong demand for workers. With an increasing number of women attending and graduating from college, prospects for financial success are bright.”

• Methodology

  For this analysis, Bankrate.com collected data from numerous proprietary surveys it conducted in 2022 and 2023.
  
  
  Bankrate.com commissioned YouGov Plc to conduct the survey on financial wellness in April 2022. All figures, unless otherwise stated, are from YouGov Plc. The total sample size was 2,457 adults, including 1,045 who said money has a negative impact on their mental health. Fieldwork was undertaken between April 6-8, 2022. The survey was carried out online and meets rigorous quality standards. It employed a nonprobability-based sample using quotas upfront during collection and then a weighting scheme on the back end designed and proven to provide nationally representative results.
  
  
  Bankrate.com commissioned YouGov Plc to conduct the survey on recession preparedness in July 2022. All figures, unless otherwise stated, are from YouGov Plc. The total sample size was 2,390 adults. Fieldwork was undertaken between July 27-29, 2022. The survey was carried out online and meets rigorous quality standards. It employed a nonprobability-based sample using quotas upfront during collection and then a weighting scheme on the back end designed and proven to provide nationally representative results.
  
  
  Bankrate.com commissioned YouGov Plc to conduct the survey on retirement savings in September 2022. All figures, unless otherwise stated, are from YouGov Plc. Interviews were conducted between Sept. 21-23, 2022, among a sample of 2,312 American adults. The survey was carried out online and meets rigorous quality standards. It employed a nonprobability-based sample using quotas upfront during collection and then a weighting scheme on the back end designed and proven to provide nationally representative results.
  
  
  Bankrate.com commissioned YouGov Plc to conduct a survey on delayed financial milestones in October 2022. All figures, unless otherwise stated, are from YouGov Plc. The total sample size was 2,442 adults. Fieldwork was undertaken between October 19-21, 2022. The survey was carried out online and meets rigorous quality standards. It employed a nonprobability-based sample using quotas upfront during collection and then a weighting scheme on the back end designed and proven to provide nationally representative results.
  
  
  A study on unexpected emergency expenses was conducted for Bankrate by SSRS on its Opinion Panel Omnibus platform from Dec. 16-19, 2022 among a sample of 1,028 respondents in English (1,003) and Spanish (25). The SSRS Opinion Panel Omnibus is a national, twice-per-month, probability-based survey. The survey was conducted via web (998) and telephone (30). The margin of error for total respondents is +/-3.5 percentage points at the 95 percent confidence level. All SSRS Omnibus data are weighted to represent the target population.
  
  
  A study on emergency savings and credit card debt was conducted for Bankrate by SSRS on its Opinion Panel Omnibus platform from Jan. 20-23, 2023 among a sample of 1032 respondents in English (1,007) and Spanish (25). The SSRS Opinion Panel Omnibus is a national, twice-per-month, probability-based survey. The survey was conducted via web (998) and telephone (30). The margin of error for total respondents is +/-3.7 percentage points at the 95 percent confidence level. All SSRS Omnibus data are weighted to represent the target population.