I had a brief, but a very eye-opening interview with IMEX America about the Women and Risk, where I talked about the real risk that women are facing: the compounding effects of the gender pay gap.

It was one simple question that started this all actually:

How does a pay gap affect a woman over the course of her lifetime and how does it affect her wealth creation?

To be honest, I didn’t realise that asking this question would open up a Pandora’s box that would lead me to as far as creating a children’s storybook that will help facilitate money and gender pay gap discussions.

When I first encountered the question on the pay gap, I asked our Chief Investment Office to simulate the wealth growth of a man and a woman after university, in setting out their professional journey, buying a house, etc. The result was so stunning that our team couldn’t believe the output when they ran it for the first time.

After a couple of days, they finally brought the model to me and told me, “Look, we tried and we calibrated and we checked everything. The model is right, but the figure is shocking.”

It turns out that just a 10% pay gap (a very benign assumption) and all else equal between man and woman; resulted in a 40% wealth gap over a lifetime. Just to put this into perspective: a Eurostat report last 2017 reported that the highest recorded gender pay gap in the EU is in Estonia at 25.6%, and the lowest is in Romania at 3.5%.

On average (in the EU,) a woman’s gross hourly earnings 16% less than a man.

In my home country, Switzerland, the gender pay gap is at 17%. At about 20% pay gap, with all else equal, the wealth discrepancy balloons to 85%.

It’s a shocking, but oftentimes, heartbreaking reality for most of us.

That is why we constantly need to bring financial awareness into the conversation. I keep encountering women who say “I’m not really as involved in financial matters as I’d like to be.” Very often, women think that their partners or spouses are more competent than they are.

You see, we did a survey on several thousands of women internationally and it turns out that 82% of women believe that their partners are more knowledgeable about money. Unless your partner studied finance explicitly, then there should be no reason that your partner will be more financially knowledgeable about money than you are.

We have to work harder not just developing women’s financial knowledge but also improving women’s financial confidence. We have to develop and grow financial awareness and trust more than financial expertise.

How do we make women aware of the fact that abdicating financial decisions is not a good idea, especially when those (wealth discrepancy, pay gap, etc.) are the consequences that you could face?

The answer to that is to start early.

Research shows that confidence is shaped by the age of 5 and adult money habits by the age of 7. So if we’re not having this conversation with little kids, especially with little girls, then we will be guilty of helping perpetuate the shocking pay and wealth discrepancies between man and woman.

We have to start talking to our little girls (and boys) early on so that they know their worth and that they are encouraged to negotiate their worth. If they are doing a chore, can they ask extra money for it? Negotiation and knowing your worth are two skills that are important, especially when you’re entering your professional careers.

We can’t let our children grow up unaware and thinking that the world is equal and fair because it is not. We have to equip them with the awareness and the truth so that they can continue to make choices that are towards a sustainable and equal future.