7 Unique Money Challenges that women face and how financial advice can help

Most people will agree that more work should be done concerning gender inequality. But what about financial advice? We have found that women experience their own set of challenges regarding money.

 We are, of course, generalising here. Not all women will work part-time or take career breaks to raise children. We simply state the statistics and the reality we see daily during client meetings. Unfortunately, there is still a traditional gender role in money management. Women also tend to be more cautious.

 The gender pay gap has been well documented. According to the Office for National Statistics (ONS) report in April 2021, the median hourly pay for full-time employees was 7.9% less for women than for men.

 Although the world is swiftly trying to close this gap, some factors can make it harder for women to build long-term wealth: 

 Women are more likely to be working part-time for an extended period

  • Women are more likely to take time out of the workforce
  • Women are more likely to be working low-paying jobs or careers with fewer opportunities for advancement than their male counterparts

 This gender gap extends into financial planning. Although we see more women take control of their finances during our meetings, many still rely on a partner to handle their finances.

 Finances can be an intimidating topic for anyone. Here are seven unique challenges that women face and what you can do about them:

1. Increased state pension age

 The state pension age for women increased from 60 to 65, which is in line with the state pension age for men. This has caused more challenging financial circumstances for women aged 60-65 than expected.

 You can check your state pension ageonline. Make sure you know how much you’ll receive and when to expect your state pension.

  • If you missed years, you could make the difference up before your state pension is due.
  • Don’t rely on the state pension. At just £185.15 per week in 2022/23, you will need to make your own provisions.

  2. Smaller pension pots

 Research by Legal & General found women’s pension pots at retirement to be half the size of men’s. Many factors influence this, including the gender pay gap, women taking career breaks for family and/or working part-time. There is also evidence of women missing out on promotions because of these gaps in their working careers.

 If possible, pay more into your pension scheme. The earlier, the better, as you will benefit from compound interest.

 Consider the financial implications on your pension if you are returning to work part-time. This could be even more reason to increase contributions.

3.  Divorce

 It’s a sad fact that in the UK, divorce rates are around 42%.

 Divorce can be an immense emotional upheaval. Add finances to the mix, and this can become overwhelming.

 The husband has traditionally handled the finances for many clients we work with.

 On the other side, women may be left with a large cash lump sum, a split of pensions or an oversized property.

 A good financial adviser can help you take control of your financial future at this stage.

4. Lack of communication between spouses

 As we highlighted earlier, females often leave the finances to their spouses. This needs to be a joint venture to take control of your finances.

 Speak with your partner about your finances. Make sure you know what you’ve got and where.

 If you have a financial adviser, conduct these meetings together.

5. Different goals for retirement

 According to a Harvard study, women have a long list of life-focused goals.

 This is fantastic news when it comes to financial advice & planning. Financial planning is about setting long-term goals and then building and maintaining a financial plan to achieve this. However, financial goals will often differ between partners.

 Communication is essential. You are far more likely to achieve your long-term financial goals if you’re both clear on these. Make sure you’re all on the same page.

 6. Longer life expectancy

The sooner you start saving, the better. People aged 65 years in the UK in 2020 can expect to live on average 19.7 years for males and 22.0 years for females, projected to rise to 21.9 years for males and 24.1 years for females aged 65 years in 2045.

Statistically, women live longer than men. I’ll let you come to your own conclusions as to why that might be…

Suppose you’re a woman and married to a man. In that case, unfortunately, you are statistically more likely to be the one left behind. This means managing the finances.

Being involved with the family finances, investing early, and communicating will help should the worst happen.

7. Different attitudes towards risk

A study by Oxford Risk found that women are less confident than men in investing. A further study by Cass Business School found that women are more risk averse regarding finances.

 Because women have a typically longer lifespan, this risk-aversion may be causing many women to miss out on greater long-term returns from their investments. Therefore, understating your risk tolerance and its effect on your investment is crucial in allowing your investment to work harder to achieve your retirement goals.

 Risk within investments is not bad. Not understanding how risk works within investments can be.

The good news is we’re seeing progress. A study by Age Wave found that Boomer women are more financially engaged than in any generation in history. Married boomer women are more than 6 times more likely to share responsibility for savings and investments than their mothers’ generation (33% now versus 5% then).

 A study by the Centre for Economics and Business Research (CEBR) in 2020 estimated that 60% of Britain’s wealth will be in female hands by 2025.

In a study by Fidelity in 2021, 86% of women agree that having their investments managed by a professional makes life less stressful.

 Working with an adviser can help you set clear goals and objectives, identify the most tax-efficient investments and help you understand investment risk. However, the most valuable part of financial advice is having a professional ‘co-pilot’ steer you in the right direction. You’re far more likely to achieve long-term financial success.

 Your circumstances will change. Having a family, a new job, growing a business, moving house or receiving an inheritance brings new challenges.

Building a plan for the future is just the first step, but developing & changing this plan over time will ensure you achieve long-term financial success.

About the author
Picture of Oliver McDonald
Oliver McDonald
Oliver is the managing director and independent financial adviser at Engage Wealth Management.
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