Here’s my latest Monday Money post, part of the series I’m hosting with Lynn from Mrs Mummypenny. It’s a great way to share content about money, so do check the links at the end for other brilliant money posts! Plus, find out how to join in if you’re a blogger. We’d love you to add your posts.
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Why don’t women invest?
Women don’t just face a gender pay gap – they also face a gender pension gap.
Lower pay, glass ceilings, time out caring for children or relatives and part-time working all mean women earn less, so have less to stash away. We are also more reluctant to make our money work harder in pensions and investments, preferring to stick to cash.
Yet because we live longer, we actually need to raise more money to cover retirement than men.
Glaring pension gap for women
Last week one of the big money management firms, Fidelity Personal Investing, published a report on the Financial Power of Women.
Fidelity crunched the numbers and reckons that young women signed up automatically for a pension at work would end up with 10% less in their pension than young men.
It’s even worse for people who are already retired, or are close to it. Many women have amassed less than half men’s pensions, looking across the different types of personal and workplace pensions. (This table from the Office for National Statistics makes depressing reading).
Research by PensionBee also identified a gender pension gap which increase with age. Overall, PensionBee found women’s pension pots are 30% smaller than men’s, and the gap increases with age, hitting 42% for those over 50.
The good news is that if we plug more into our pensions when younger, women can close that gap. The bad news is that women are more reluctant to put money into investments that will actually make a difference.
Women save – but stick to cash
Women are great at saving. We actually open more individual savings accounts or Isas (accounts where you keep more of your money, because the tax man doesn’t take a cut) than men.
Trouble is, we stick to cash, while more men take the plunge in Isas investing in the stock market.
HM Revenue & Customs tracks the figures. In 2015-2016, 5.2 million women took out cash Isas, compared to only 4.4 million men. Yet only 0.9 million women started stocks and shares Isas, compared to 1.1 million men. (Here’s the table with Isa info, if that floats your boat).
Why does that matter, if we’re all saving something?
Because over the long term, stockmarket investments beat cash. Yes, there are ups and downs along the way, yes, it is possible to get back less than you invested at the start – but historically, investing has come out way ahead.
Fidelity did a calculation looking at the last four years. Someone investing in the FTSE All Share index (which represents the average share price of all companies listed on the London stock exchange) would have ended up with 25% more money. Stay in the average savings account – and your money would have grown a tiny 0.44%. (It’s on page 7 of the Fidelity report on The Financial Power of Women, which can be downloaded here).
I’m not shouting about growth figures so macho types can punch the air at high returns, congratulate themselves on their investment prowess and stash away shekels for the sake of it.
Making the most of your money isn’t important because of blah-blah returns and excuse-me-while-I-yawn growth. Instead, it’s the roof over our head, the food on the table and the clothes on our back. Investing can help us avoid the choice between heating and eating in retirement, enable us to change careers and head off travelling. It’s the freedom to realise our own dreams and help others, put kids through uni, treat grandchildren, support great causes.
What stops us investing?
If there was an easy answer to why women don’t invest, you’ve got to think the industry would have solved it years ago.
After all, Holly MacKay from Boring Money reckons that if the same number of women invested the same amount as men, there would be £100 billion more invested in the UK. That’s a lot of money investment companies are missing out on.
Fidelity went out and asked women why they don’t invest. Women were:
- less likely to feel confident about choosing financial products and services
- more likely to say we lacked knowledge
- a whopping 81% said lack of trust in investment providers stops us from investing
- more likely to find info from investment companies complicated and intimidating
Personally, I think it’s a whole mass of factors.
Less money, less willing to risk it
If you have less money in the first place, you want to hang on to it as hard as you can. Take risks on the stock market? No thanks.
Less gung ho about risk
Sweeping generalisation ahoy. I reckon men are much more willing to think “yeah, I’ll have a punt on that, so what if I might lose money?”, whereas women are more reluctant to risk any losses. Rather than hunt for more, we’d rather protect what we’ve got. An HSBC study showed that 72% of women don’t like to take investment risks, compared to just over half of men.
Do bear in mind that sensible stock market investing, spread over different investments over the long term, isn’t remotely like gambling your life savings on black. Don’t let fear of a limited chance of loss put you off the much greater chance of returns.
A whole lot of history
Let’s not forget there’s a whole load of history holding women back. Women used to have to hand over all their money and property on marriage. The expectation that women would leave financial decisions to their husbands has persisted far longer.
Researching the state pension system, I’ve been staggered at how it was structured around working men providing for stay-at-home wives. Right into the 1970s, women could not open a bank account in their own name, or apply for a loan, credit card or mortgage, without a signature from a man.
Nowadays, learning to manage your money can help ensure death or divorce doesn’t set fire to your own financial future.
Investing is for other people
I’ve written before about perceptions that investing is only for rich people, City types and investment nerds who like nothing more than perusing share prices and spreadsheets (nothing against a good spreadsheet, but investing can be a heck of a lot easier than that).
Actually, you don’t have to be a squillionaire to invest. I have some money with Vanguard, which accepts from £100 a month. Other investments websites and platforms have minimums as low as £50 a month, £25 or even a quid.
Can’t see it, can’t be it
Women lack female role models encouraging them to invest. Female fund managers are few and far between, rarely hit the headlines and there aren’t hordes of female commentators either. I don’t come from a family that invested – savings, yes, property, yes, but no experience in the stock market. That’s why once I finally started investing my own money I’ve tried to talk about it, both in print and in blogs, and I encourage other women to out themselves as investors, Spartacus stylee.
Too conscientious for our own good
Even if you want to invest, I also think men are more likely to plunge in, whereas women want to do more research and understand their options. With investing, there’s a whole load of different concepts and jargon to get your head round. With limited time available, investing may never make it to the top of the to do list.
As Moira O’Neill, head of personal finance at Interactive Investor, says: “Don’t put it off until you think you have more money or know enough about investing to feel more confident. The process of starting will give you confidence.”
Baffled by the language barrier
Investments have their own language – and if you don’t speak it, it’s really hard to get started.
Many investment firms don’t do themselves any favours with impenetrable prose, designed more to fend off the regulator than encourage newbie investors. I’m also suspicious that some investors enjoy using terminology to show off their knowledge and exclude others.
I’m not suggesting info on investing should be patronising and written on pink paper. But I’m passionate about trying to explain the benefits of investing in language that’s easy to understand, and have contributed to websites like StepstoInvesting in an attempt to help. Fidelity found 45% of women describe investment communication as “complicated” as well as “incomprehensible” (18%) and “intimidating” (18%). There’s a long way to go.
But women only encounter the jargon if they investigate investing – and there’s a lot of language to discourage us from even getting that far.
The #MakeMoneyEqual research by Starling Bank found that the media speaks to men and women differently about money. We’re separated into spenders (women) and earners (men). Articles for women overwhelmingly define us as spending too much, and suggest ways to cut back and seek bargains. Articles for men, however, emphasise making money as a masculine ideal, treat men as savvy financiers, and suggest ways to enhance their investments.
Anne Boden, who heads up Starling Bank, said: “Gender inequality reaches far beyond low salaries and boardroom tokenism; it starts with the way we’re taught. It starts with the way we’re spoken to.”
Overwhelmed by choice
I’ve heard people up to their ears in the industry say things like “but you don’t need much time – it only takes 10 minutes to open an Isa”.
I find that so frustrating. Yes, opening an account might only take 10 minutes. But you have to know you want to invest, know what on earth an Isa is and why it might be better than an alternative, know you want to open it with that particular company and know where you want to invest your money once it’s opened.
Even if you want to invest – it’s still hard to pick what on earth to invest in.
Look at the big fund supermarkets where you can buy investments, and you face a choice of thousands and thousands of different options. Different structures, investment approaches, managers, companies, countries. Gazillions of numbers and metrics to compare them. Caveats aplenty about past performance being no guarantee of future returns. It’s enough to make your head explode.
I reckon most of us don’t want a enormous choice – we either want to be told what to do or just have a couple of options, clearly expressed. But financial advice is expensive, targetted at the wealthy, and not always trusted. I applaud the “robo advisers” that have sprung up in recent years, with well-designed websites, limited options, and questionnaires to help people pick. Hopefully big firms with trusted track records will also harness technology to help potential customers.
Unlocking women’s financial power
After listing lots of barriers stopping women from investing, I don’t have a magic wand to wave them away.
However, I am committed to helping people make the most of their money, as a personal finance journalist and a money blogger.
That’s why I was delighted to take part in the first Fidelity Women & Money Innovation Lab last week. Fidelity is bringing together thought leaders, policy makers, influencers and investors to identify ways to break down the barriers women face and help facilitate change.
As Maike Currie from Fidelity says: “It’s about getting the other 50% of the population to harness their financial power through investing – the breadwinners and homemakers, the ones looking after the family, caring for sick and elderly relatives, managing the purse strings and teaching the next generation about money.”
Fingers crossed we can start making a difference, one step at a time, and help women to #GETINvested.
Now – over to you. What discourages you from investing – lack of money, lack of time, lack of knowledge, fear of risk or a whole combination and a dose of other stuff on top? Plus – crucially – what could help you break down those barriers?
Disclaimer: I was not paid to write this post, nor was I paid to attend the Women & Money Innovation Lab, although Fidelity did cover my travel expenses.
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