For many women, key financial goals such as saving for a pension, investing and paying for protection insurance, are fundamentally harder to achieve than they are for men.
Our financial planning for women, can help women manage and achieve some of those goals. We explain how.
Why we need to talk about women and money
As priorities change throughout our lives, so do the decisions that we make about money and it is those decisions that will in turn determine the wealth we acquire.
For a woman considering starting a family for example, providing for her future retirement is not likely to be at the top of her priority list. It is also likely that taking a career break will have a detrimental effect on her ability to earn, save and invest for the future. This may be why it is reported that 70% of women fear taking a career break1 and is one of the reasons that financial goals are fundamentally harder to achieve for women than it is for men.
Another factor affecting pensions for women is their employment status. According to the latest Scottish Widows Women and Retirement report, one in three self-employed women have no savings for their future retirement, with less than half saving the minimum recommended level, compared with 56% of women who are employed2.
Additionally, women tend to be more cautious with their investments and are more likely to prefer the safety of instant access cash over putting more into a pension or maximising the tax-efficiency of stocks and shares ISAs. This can leave their savings exposed as they are likely to lose value in real terms as inflation erodes them.
The global pandemic has had a significant effect on women and the ability to build financial resilience. A recent report published by the Office for National Statistics, stated that a ‘consistently greater number of women than men have been furloughed', and that women’s jobs are 1.8 times more vulnerable than of men’s during the pandemic3.
When it comes to seeking financial advice on how to manage and improve finances, young women are less likely than young men to do so, which may add to the challenges of the gender pay gap. Whilst the gender pay gap is almost zero for under 40s, this is over 10%2 for full time employees who sit within the 40-49 year old age group and older. In addition, other factors such as a lack of confidence in managing finances or difficulty accessing correct information amidst the industry jargon make it more challenging for women. Let's not forget that future wealth may not top a woman's priority list either; therefore all things considered, it may not be surprising that it is often the case of just not knowing where to start.
When to seek advice
An article released by FTadviser stated that women in their thirties who take a 12-month career break would need to increase their pension contributions by 1% to get the retirement they would have got without that break. However, if they wait until age 55 to top up their pensions, they would need to increase contributions by 6% to fill that gap. This demonstrates the importance of seeking financial advice early to enable the likelihood of achieving retirement objectives.
In addition, the way in which pension contributions and savings are invested needs consideration to ensure that the money continues to work hard throughout the years. As highlighted earlier, it is likely that pension planning is not top of the priority list when considering starting a family, but there are practical steps that a Mercer Private Wealth Financial Planner can advise on to minimise the consequences of a career break.
As the family model becomes more of a fluid landscape, it is best to take stock of family circumstances, and ascertain what benefits are already in place through insurances or workplace benefits. It's important to identify where there could be gaps should an illness or an unexpected event occur. The pandemic has brought health into a sharper focus. Situations can change quickly, it is important to insure what you cannot afford to replace, and more importantly, at the right level as it is commonplace for people to under-insure themselves.
It is prudent to seek professional financial advice as early as possible, thus ensuring financial goals and objectives are determined and achievable. Having the right advice, guidance and knowledge leads to a more confident, secure and comfortable financial outlook and this is where Mercer Private Wealth can help. Research shows that those who take advice are more confident that they will achieve their long-term goals with the guidance of a financial planner. This in turn empowers individuals to feel more financially literate as they can understand what actions they need to take to achieve their goals.