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Financial independence for women—why it’s still so much harder to achieve

Poverty affects many people in old age. However, it’s most often women who struggle financially in retirement. Why? And are there any solutions to combat senior poverty in Germany? Find out more!

8 min read

Let’s first acknowledge: women’s rights and financial independence have come a long way. Even just a century ago, a financially savvy woman with her own bank account was unthinkable. Today, more than 95% of women in Germany have their own bank accounts. Plus, increasing numbers of women are investing in wealth generation, stock trading, ETF savings plans, and other financial products. 

Still, countless women aren’t 100% financially independent, with low pensions tipping them into old-age poverty later in life. In this article, you’ll learn why women historically struggled with financial independence, what the situation is like today, and which European countries have made the most strides forward.

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Financial inequality between men and women: a history

Financial independence is an important factor in leading a self-determined life. For much of recorded history, most women didn’t have a say in their household finances—and earning their own money was out of the question. Men were the only breadwinners in the family, while women were responsible for child-rearing and domestic duties. Women were left dependent on their partner’s favor—and finances—and often had to stay in unhappy marriages for the sake of financial security. 

This pattern is still reflected in many traditional family structures today, with husbands pursuing careers and wives raising children. When women are busy with domestic duties and not able to work outside the home, they often can’t pay into their pensions. That means their retirement payments later on are measurably smaller. What’s more, rising divorce rates have an effect: after a divorce, women are more likely to slip into old-age poverty.

Expanding women’s rights to combat financial inequality

After centuries of oppression, the last hundred years has seen women gain ever-more rights, independence, and autonomy.

After winning the right to vote in 1918, women had a stronger political voice in Germany. Women’s suffrage also provided them with critical freedoms, especially the ability to make important decisions without consulting their husbands. This historic win led to 111 women being elected to the German Reichstag’s parliament. In the years to come, women parliamentarians further advanced women’s rights—securing a minimum wage and ensuring social security for women engaged in home-based work.

Possibly the most important milestone was reached in 1949: The equality of men and women was enshrined in Germany’s Basic Law. When Germany’s Equality Act finally came into effect around a decade later (1958), it abolished the requirement for men to be the sole financial decision-maker. This meant that women could independently open their own bank accounts and manage their own money. 

At this point, women couldn’t pursue a career independently or earn their own money, though—they still required their husband’s consent.

It was only through Germany’s Act to Reform Marriage and Family Law that women finally gained the right to choose their own careers and earn their own income. The Employment Equality Act was also anchored within Germany’s Civil Code in 1980 with the aim of protecting women from unequal treatment in the workplace. This law gives the right to equal pay for equal work, regardless of gender. It’s an admirable ideal—but still a challenging undertaking, even today.

Financial inequality today

Despite the progress, financial inequality lingers on, both within private relationships and in society at large. Because of gender roles that held sway over the last century, money is still often seen as a “man’s domain” in more conservative family models, which can lead to all kinds of problems for women. But other societal factors also play a role in gender financial inequality.

The gender pay gap

The gender pay gap describes the gender-based difference in earnings between men and women. In the world of work, this often means that women are paid less than men for performing the very same work. You can imagine the result: Women have less money at their disposal. For example, in 2020, German women earned around 18% less per hour than men in the same positions. The gender pay gap is thought to be a major contributor to old-age poverty in women and to the financial dependence of some women on their partners or families.

The gender investment gap

In 2021, just a third of all investments in stocks, ETFs, and funds were made by women. This investment discrepancy between men and women is called the “gender investment gap.” Again, the gender pay gap contributes to this situation, with women on lower salaries having less disposable income to invest—and, of course, less time to manage investments, thanks to women’s often-disproportionate share of care work. Read about some of the famous investors that women (and men) can draw inspiration from here.

The gender wealth gap

Factors like the gender pay gap and gender investment gap mean that income and assets are unequally distributed. In turn, this leads to something called the “gender wealth gap.” Every day, young girls and women perform 12.5 billion hours of unpaid work, generally caring for relatives or looking after a household. During this time, it’s practically impossible for women to earn money and build up assets. Plus, the fact that women tend to earn a lower salary for the same work also plays a key role in their struggle to build wealth.

The gender pension gap

For many women, unequal distribution of salaries and assets are frustrating at any time, but the strongest consequences aren’t felt until later in life. Their pensions are often much smaller than men’s, as a result of paying less into their pension funds—or paying into them over a shorter period of time—and building up their assets too late (or not at all). The gender pension gap is directly linked to old-age poverty for many women: 18.2% of German women aged 65 and above were affected by old-age poverty in 2019, with an income of just €1,176 a month.

Financial inequality across Europe

Gender-based financial inequality isn’t only an issue in Germany: Gender gaps in pay, wealth, and pensions are a major problem in other European nations as well, particularly ones with less stable economies.

Causes of financial inequality in Europe 

On average, women in Europe currently receive 14.1% less per hour for the same work as their male colleagues. There are numerous reasons for this, with both societal and historical origins. Around 24% of the gender pay gap can be linked to an over-representation of women in proportionally lower-paid industries, such as the care, healthcare, and education sectors. However, the extremely unequal distribution of paid and unpaid work between men and women also plays a major role. Why? Because—thanks to long-standing traditions and societal expectations—unpaid work usually ends up on women’s plates. 

Even women in better-paid sectors are affected by financial injustices like the so-called “glass ceiling” effect. Invisible barriers can hamper women from advancing in their careers—which also keeps them from earning better salaries and more powerful positions. Women can see the successes that others achieve, but many struggle to break through and do the same. It’s one of many reasons why women only make up 8% of all CEOs in the European Union.

Alongside the glass ceiling, unequal pay for men and women continuesto be a cause of financial inequality—despite the fact that equal pay has been a key component of the European Union treaty since 1957.

Financial inequality: Which EU nations are the hardest hit?

The European Union is one of the most advanced, economically prosperous regions in the world. But here, too, there are major differences between the individual member states as far as the gender pay gap goes—with some surprising findings.

The smallest difference in salaries between women and men is in Luxembourg, Italy, and Romania, at less than 5%—while a gulf of 15 to 19% can be found in countries including Germany, Austria, Latvia, and Estonia. 


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Disclaimer: Shares, ETFs and funds referred to in the article are always subject to risks. Information provided in the article does not constitute any form of investment advice or recommendation to buy or sell securities or other financial instruments. All information provided is for educational and illustrative purposes only and represents exclusively the opinion of the author. None of this information constitutes a recommendation for a particular investment strategy. No liability can be assumed for its correctness. Should the readers adopt the offered contents as their own, make use of any information or follow any opinion referred to in the article, they act at their own risk.

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