Why women need to do more with their money

Women are financially on the back foot. In the UK, there is a very significant gender pay gap (8.9% for full-time workers)¹, a gender pension gap (almost 40% in 2017-18)² and a gender investment gap of £15 billion in the UK. Women hold just £14.3 billion in investments to the £29.3 billion held by men. This is the ‘gender wealth gap’ or ‘gender investment gap’. It starts young; just 4.4% of millennial women have an investment product in comparison with 7.3% of millennial men. The chasm widens further in Generation X, where 16.1% of men are investing versus 9.6% of women³.

Research shows that 52% of women⁴ have never put their money into an investment product, compared with 37% of men. BUT research also shows that women make good, if not better, investors compared to men. Women are more risk-averse, and less emotional.

We need to acknowledge the financial challenges that impact women. These can include career interruptions either for raising children or caring for elderly parents and longer lives to fund. And in the process, we can gain confidence in our money dealings.

Most of us didn’t get financial education at school, and a lesson on pensions or how to send an invoice would have been useful. It’s tempting to be apathetic in a world where most of the “benefits” of products like pensions and ISAs benefit the wealthy. Getting on the property ladder is almost impossible – most of us need our parents to help out. The cycle of poverty is real, and money only makes more money if you have it in the first place.

Money can be made to seem very complicated– technical and detailed-but it is not an exclusive club. We don’t need to know the direction of equity markets (they normally go up over the long term) or know the interest rate of a government bond to sort out our finances.

The big question is: How can I get better with my money? One way is to talk to other people about their finances. We need to break the taboo around money talk. Encourage conversation between friends, family, and financial professionals and in schools. Seek mentors and learn more about money and finances.

Taking small steps at a time; decide what you really want and focus on your goals, rather than saving for a future you don’t know is going to happen. Create a plan that matches any unique circumstances and revisit that plan often and make course corrections along the way. Some simple steps to consider can be: invest in premium bonds; open an ISA; start a retirement plan early, taking advantage of the tax relief and compound interest; put aside a percentage of your income to pay your tax or student loan, and cut down on unnecessary spending.

Be part of the solution.

Money affects our lives – our work, health, relationships and everything else. Dealing with money is unavoidable, yet we often feel like talking about it is out of our remit. It’s time that changed, for our own sake.

Start your own financial empowerment by:

• Keeping a budget

Note your net income and track your spending.

List all your fixed expenses. These are regular monthly bills such as rent or mortgage, utilities, or car payments. It’s unlikely you’ll be able to cut back on these, but knowing how much of your monthly income they take up can be helpful.

Next list all your variable expenses.

Those that may change from month to month such as groceries, gas and entertainment. This is an area where you might find opportunities to cut back. Credit card and bank statements are a good place to start since they often itemize or categorize your monthly expenditures.

Adjust your habits if necessary

Once you’ve done all this, you have what you need to complete your budget. Having documented your income and spending, you can start to see where you have money left over or where you can cut back so that you have money to put toward your goals.

• Setting goals

Short term, mid-term and long term. The goal-setting process involves deciding what goals you intend to reach; estimating the amount of money needed and other resources required; and planning how long you expect to take to reach each of your goals.

It’s not just the number that matters in setting your financial goals. It’s the process itself.

• Learn about investing

Learn where to put your money and which investments will be most advantageous to you and focus on the long-term.

Stock investing is filled with intricate strategies and approaches, yet some of the most successful investors have done little more than stick with the basics.

Also, starting the next generation of women along a good path, the following should be considered.

1. Invest a bit more for the girls in your family than the boys. You could set money aside in a Junior ISA, or even start a child’s pension for them, which they won’t be able to access until the age of 55. Even just a few pounds extra saved now could make a big difference to your daughter, niece or god-daughter in the long run.
2. Talk to young female family members about the financial obstacles they’re likely to face in their lives – and give them a solid grounding in money matters, with ongoing financial education. Stress the importance of building a regular savings habit from an early age.
3. Financially empower them, too. Remind the girls in your family that money doesn’t have to be a dirty word. Help them feel like they’re in control of their finances, and give them the confidence to ask for that promotion or pay rise at work. Encourage them to challenge the status quo. In a world where it’s the norm for women to be financially disadvantaged, they’ll need to learn to be assertive – to become strong advocates for themselves.

The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than you invested.

The levels and bases of taxation and reliefs from taxation can change at any time. Tax relief is generally dependent on individual circumstances.

1. https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/bulletins/genderpaygapintheuk/2019
2. https://www.ft.com/content/a1ff867a-d84f-11e8-a854-33d6f82e62f8
3. https://www.prospectmagazine.co.uk/other/gender-wealth-gap-women-investing
4. https://yougov.co.uk/topics/politics/articles-reports/2018/04/12/over-half-women-have-never-held-investment-product