When it comes to money, men and women tend to behave differently – and we’re not just talking about spending habits. Take investing, for example, women are less likely to enter the investment arena than men – and although we’re seeing an increasing number of women taking the plunge, the investment world is still largely dominated by men. So, why are women reluctant to invest? And why should they consider investing?
Women save but don’t invest
Women are good at managing money. In fact, a recent study shows that women are more likely to take control of key money chores in the household. About 55% of women say they plan the day-to-day spending, versus 31% of men, and 46% of women say they are the ones responsible for sorting out short-term savings, against 28% of men1. And talking about saving, women are doing pretty well at tucking their money away. In 2016/2017, women opened around 4.4 million Cash ISAs, against 3.7 million for men2. However, when it comes to investing, women aren’t quite there yet. According to a study, only 23% of UK women hold an investment product, compared to 35% of men3. Research also found that women, despite a longer lifespan than men, tend to save less for their later life. For instance, women in their early 60s will have on average £36,000 in their retirement pot, whilst men at the same age will be able to enjoy an average pot of £142,0004. So, why are women reluctant to invest in their future?
Well, first, there’s the pay gap. Women earn less than men on average. The latest numbers show that full-time male employees in the UK earn 8.9% more than their female counterparts – it’s better than 2012 when the gap was 9.5%, but it’s still a huge difference5. This pay gap means women are more likely to struggle with their finances and this could have a serious impact on their lives and relationship with money. Many will focus on their short-term needs rather than thinking about saving for the future. And others may be reluctant to take any risk with their hard-earned money. But this isn’t the only thing stopping women from entering the investment world. Women, even those without any financial hardship, feel they don’t have enough knowledge or experience to be an investor. They’re lacking confidence and it’s holding them back. According to a survey conducted by YouGov Omnibus, only 28% of women say they feel confident enough to consider investing, against 45% of men6.
The situation isn’t ideal, that’s for sure! By staying away from the investment world, women may be putting their financial future and independence on hold. Women could claim back their financial power by considering investing.
So, what are the benefits of investing?
Investing is a great way to give your money a chance to grow over the long-term, and that’s key if you’re looking to take control of your financial future. As mentioned earlier, women may favour cash savings to investments, and whilst it’s important to build an emergency fund to cover any unexpected emergency, saving may not be enough to boost your finances over the long-term. In fact, by sticking to saving accounts only, women may end up harming their financial lives. How, you ask? Well, when you save, you’re typically guaranteed to get back what you’ve initially put in, plus a little bit of interest. But if the interest rate you get from the bank falls below the rate of inflation, the value of your savings will decrease, and your money will grow at a slower pace than everything else. Put simply, things tend to get more expensive with time and if your savings don’t follow, you won’t be able to afford as much as you could with your money. To enjoy real growth, your savings need to grow at least at the same pace as inflation. And this is where investing could help. When you invest, there’s a risk you could end up with less than you initially put in. But since returns aren’t tied to any interest rate, there’s also every chance you could make inflation-beating returns.
Historically, women have tended to see the glass as half-empty and the lack of guaranteed returns may have put them off. Yes, investing does come with risk, but there are ways to mitigate it. If you spread your money across investment types, companies, and regions, the risk of losing everything will effectively decrease, as poorly-performing investments should be balanced out by others doing well – in the investment world, this strategy is known as diversification. Another way to mitigate risk is to try and commit long-term. Evidence shows that the longer you remain invested, the more likely you are to see positive growth. For instance, people who stayed invested for any 10-year period between 1986 and 2019 have had an 89% chance of making a gain7. So, if you’re a woman and want to give your finances a boost, holding a diversified portfolio over a number of years could help you build a decent nest egg for the future.
How to start investing
Becoming an investor when you’re a woman can feel intimidating, especially when you feel like you’re not knowledgeable or experienced enough. Luckily, with online investment platforms, you don’t need to be a financial wizard to start investing. At Wealthify, for instance, the hard work is done for you as our investment team will build you a Plan with the right mix of investments and manage it on an ongoing basis. And that’s not all! With digital investment services, you don’t even need to be super rich to invest, you can start as little or as much as you want depending on how much you can afford to invest. Years ago, it may have been hard for women to join the investment world, but nowadays, thanks to technology and innovation, investing is something women can easily do wherever they are and without hassle or feeling like they don’t belong – as many say, the future is female, and this will probably include the future of investing.
7: Data from Bloomberg
Past performance is not a reliable indicator of future results.
The tax treatment depends on your individual circumstances and may be subject to change in the future.
Please remember the value of your investments can go down as well as up, and you could get back less than invested.