The She-cession and importance of a f*** this fund
Right now, one in four women in the USA is considering stepping away or “downshifting” from her career due to the impact of the pandemic on her life. Let that sink in.
We’ve seen life at home and at work as we know it upended. Many women globally are facing decisions that a year ago would have been unimaginable.
A recent landmark study highlights the disproportional impact that this economic crisis is having on women -- especially mothers and BIPOC. So much so that this crisis is being referred to as a “She-cession”. Women are:
Being furloughed and losing jobs at a greater rate than men. Not only from layoff but an increase in quit rates.
Struggling with burnout especially with additional demands of childcare, remote schooling and household activities often while working from home and feeling there are no boundaries. The closure and/or partial reopening of schools and childcare facilities alone has forced many mothers out of the workforce.
Over represented in essential services and many are on the frontlines...facing all of these demands and not being able to work from home. Women represent two-thirds of the health workforce worldwide.
At increased risk of domestic violence, confirming a pattern seen in previous lockdown and confinement situations (UNDP 2015).
Stepping away from careers or reducing work hours, has an immediate crippling effect on women and their money in the present and in establishing financial security for the future.
One way to make sure we, as women, can be resilient in the face of economic hardship or any type of uncertainty is by maintaining what many endearingly like to call a f*** this fund. Let’s talk about this.
How & when to build f*** this fund
2020 or not, most women were already feeling insecure about their financial future. These turbulent times underscore how critical an emergency fund is to ease stress about uncertainty.
How to go about building an emergency fund? It may seem obvious but in order to set aside cash, you need to live below your means. Review your life for ways to reduce spending so that you live well below your means.
Your spending must be < than the money you bring home.
When you’re not facing an emergency or uncertainty it can feel tempting to kick the can down the road; however, consider the stress implications of putting away money regularly towards saving for let’s say $15k for an emergency as opposed to a VERY different scenario of scrambling to put together $15k to cover unexpected costs during an emergency. When things are going wrong, the last thing you want is financial stress.
So the time is now, not tomorrow to take the steps for setting up an emergency fund. If you already have funds set aside jump to step 3...
Figure out how many months you want to have your funds cover. You’ll hear a variety of opinions on this from 3 to 6 to 12 months. Honestly, it depends on your situation and what will let you sleep at night. There is a general consensus around having an emergency fund to cover 6 months of your living expenses. With the crisis we’re in now it would sure feel good to have a 12 month safety net.
Estimate your monthly expenses. Examine what you spend, on average, in a month for essential expenses like housing, utilities, transportation, food, travel, insurance and multiply that by six (or however many months in step 1). Don’t forget any debt obligations you have.
Choose where to hold your emergency fund. Don’t keep it in your checking account. Don’t keep it in a traditional savings account which often earns you little to no interest (average 0.01% APY!). We suggest a high yield savings account (often with a digital bank) which generally pays 20-25 times the average of a traditional brick and mortar savings account. Pre-pandemic and when the economy is stable these can have a yield up to 2% right now they are around 0.6-0.8%.
Set up automatic deposits to reach your target amount. Don’t rely on manual deposits, set up auto to hold yourself accountable.
And build this emergency fund BEFORE you start investing. Some people think if they are investing they don’t need an emergency fund and in a worst case scenario that they will withdraw from their investments. Well yes, that’s an option. However, you don’t want to be forced to sell investments in a less than ideal scenario say the market is down and face losses. And not be able to access cash if you need it immediately.
Once you are investing, it can be tempting to tap into an emergency fund to invest in the stock market. We get it, resist . Hopefully you’ll never have to use your emergency fund but your future self will be damn thankful you have it, if you do end up needing it.
Once you have your emergency fund, consider under what circumstances you would dip into it. As a general rule of thumb before withdrawing from it, check whether it’s to cover an expense that is urgent, out of the ordinary and necessary.
And if it is, that’s the purpose of this account. Don’t beat yourself up for accessing it, this is what it’s there for. When you’re back on your feet, it’s time to start depositing into it again to replenish it.
Zooming back to the big picture...
Back to one in four women considering stepping away or “downshifting” from her career. The departure of women in the workplace is putting progress made towards closing gender equity gaps in recent years at risk including our wealth. What can we do to help mitigate this? Speak up at work for yourself and others to ask for what is needed before someone gets to the point of feeling there is no other choice but to leave.
We’ve already seen examples of companies making changes that will likely carry on in the future such as more flexible schedules and the normalization of working from home for those who can. Also we should be asking companies and the government to be making plans for pathways that support women reentering the workforce when post-pandemic. Companies have a choice to listen to employees and understand their needs and how they can be supported in these unprecedented times.
And it’s not just about a global social and economic crisis.
Financial peace of mind in the face of any worst case scenario is reached knowing that you have the means and ability to weather it. If you are in a situation that is impacting your wellbeing in a negative way -- a relationship or a job -- a f*** this fund gives you the means to walk away and take care of yourself and loved ones.
2020 has been the epitome of the year of uncertainty. We want you to feel you have a shield for uncertainty.
For references and further reading:
VOXEU. COVID-19, employment and women in OECD countries 22 April 2020
Lean In, McKinsey & Company Women in the Workplace 2020 Report