Did you know that women are less likely to manage their own finances?
Although many women deal with the day to day finances of their family, many do not feel confident seeking financial advice to plan for their long-term financial future.
Yet, financial planning is crucial – especially for women who often face challenges such as the gender pay gap, career breaks for care-giving and longer life expectancy. Women need to make sure that they are making the most of the financial opportunities available to them.
What are the issues?
Gender pay gap
The gender pay gap is narrowing, but it still exists. According to the Office for National Statistics (ONS), the gender pay gap stands at 2.2% in Scotland which is higher than both Wales (1.9%) and Northern Ireland (0.8%) (Source). It has been found that the gender pay gap is wider among high earners and those over 40. The gender pay gap results in women potentially experiencing economic inequality and issues such as lower pensions.
Investment gap
Alongside the gender pay gap, there is also a clear investment gap. HSBC have found that only 31% of women feel confident about investing their money while 63% simply don’t know where to start. There is also an element of fear as 19% of women think that investing is too risky and are worried that they would lose money. This shows that financial education is key and it is important to show women how to make their money work harder through investments.
Motherhood and caring responsibilities
Research has shown that the bulk of childcare and other caring responsibilities still fall to women. Research from the ONS shows that women prefer the flexibility offered by a shorter commute as they tend to be the main providers of childcare and therefore may need to be closer to their home. There is also a trend for women to move to part-time work from full-time work once they return to employment after maternity leave. According to Understanding Society, only 27.8% of women were in full-time work three years after the birth of a child compared to 90% of new fathers. These factors increase the chance of career stagnation and lower the chances of progression and promotion.
However, it is not just children that women are expected to care for. Research by Age UK found that there are 1.25 million sandwich carers in the UK. These are people who care for their children whilst also caring for an older relative such as a parent. Women make up 68% of these carers. Women who have taken a career break to have children are more likely to provide care in later life. It was found that having previously adapted their life, they are more likely to see the value in adopting another caring role in the future.
These career breaks can have a significant impact on long term earnings and retirement planning.
The Pension Gap
On average women in the UK live longer than men. Therefore, they need to think a little differently to achieve a decent pension. Research by Scottish Widows has found that the average woman in her 20s will retire with £100,000 less in her pension than her male peers. Women would have to work an extra 37 years in order to close this gap. This is caused by the aforementioned issues, i.e. the gender pay gap, career changes due to motherhood and increased caring responsibilities.
How can we overcome these issues?
It is important that women can educate themselves and understand their finances so that they can combat these issues.
Building financial literacy and confidence
Knowledge is power and financial literacy is key to taking control of money. Free resources such as podcasts, blogs and YouTube channels make information about personal finances accessible. Using content from these sources can help to create a base level of knowledge. These sources can also help with building habits such as budgeting, setting goals and saving towards an emergency fund. This can help women gain confidence and begin to take control of their finances.
Planning for career breaks and life events
If a big change is anticipated, it is sensible to make sure the potential impact has been fully considered from a financial point of view.
We have advised many women making big life transitions. We know it can be scary on your own when there can be various possibilities, and the financial impact of change can feel huge.
We use a modelling tool to help our clients visualise the financial future and work through possible scenarios. This process can be empowering to understand how things look with a bigger picture perspective on the finances. It can help make a confident decision to move forward and make the change.
A career shift has been more common in the last few years. For some this can mean going into self-employment and taking more financial risk that income will take time to build and could be highly variable. We think about this from a cashflow perspective to ensure there is enough money to support such a transition. Bills, food, rent can all add up if there’s not a steady income stream.
Contact a financial adviser
Financial planning isn’t just for the wealthy – it’s a powerful support to ensure your long-term financial security. However, even with all the resources and information available, the world of personal finance can be confusing and quite daunting. Getting in touch with a financial adviser can help you to understand your position and define financial terms in a straightforward way to bring clarity and to help with making decisions. Advice from an expert can remove stress and provide peace of mind.
It is important to take professional advice before making any decision relating to your personal finances. Information within this article does not provide individual tailored investment advice and is for guidance only. We cannot assume legal liability for any errors or omissions it might contain. Ethical Futures llp is authorised and regulated by the Financial Conduct Authority.