Female wealth is rising, yet investment gender gap persists

Female wealth is rising, yet the investment gap between men and women persists to challenge building a secure future.

New research from Charles Stanley Direct reveals there is a significant investment gender gap as half (50%) of women admit they haven’t tried investing, compared to just over a quarter (27%) of men.  This is worrying because it means women are missing out on potentially higher returns, which could impact their financial stability.

This year’s International Women’s Day (8 March) focuses on challenging the world, based on the view that challenge brings change. But that’s easier said than done when it comes to money matters. As well as the traditional barriers to women being able to invest, including the gender pay gap and the fact women are traditionally the ones to take time out of their career and raise a family, the pandemic has created another.

Financial hardship

According to a new study by Fidelity International, almost a quarter (23%) of women in the UK have experienced a fall in their income over the last 12 months. During this time, the average loss per month was £463. This could equate to £5,556 over the course of a year. This drop in income will have a knock-on effect on women’s ability to save and invest for their futures.

Three in ten (28%) women said the amount they have saved in the last 12 months has fallen; 17% of women have invested less, and one in eight (13%) have reduced the amount they contribute to their pension. This impact on long-term savings is felt most acutely by women in their 40s, with nearly one in five (18%) decreasing their pension savings over the last 12 months.

To cover falls in income, many women have needed to make financial decisions that could have long-term financial implications. Two-fifths who have seen their income fall have been forced to raid savings to cover daily outgoings, while over 10% have resorted to borrowing on a credit card to make ends meet. There’s no escaping that for some households, saving is going to be extremely tough for a while.

Accidental savers

Despite much hardship for many, there are women that have not suffered any drop in income and have saved money during the pandemic and lockdowns. Households saved a massive £18.5 billion in January – taking the total set aside by so-called ‘accidental savers’ to £170 billion, according to the Bank of England.

This is money that would have ordinarily been spent on summer holidays, city breaks and ski trips as well and meals out and entertaining, which coronavirus has put a stop to.

This money has found its way to pensions and ISAs, it seems, with many leading platforms reporting surges in openings of Isa and self-invested personal pensions (Sipps).

There have been encouraging signs that women are part of this new interest in investing. For example, at digital wealth manager Nutmeg, 40% of its new investors in 2020 were women, marking a significant increase on previous years.

The secrets to building long-term wealth

Women are traditionally much more likely to hold money in cash. When it comes to the reasons why women don’t invest, almost a third (31%) say it’s because they don’t know where to begin, compared to just a fifth (20%) of men who say the same.

At a time when savings accounts and interest rates offer poor value, holding more money than is needed in cash could be having a long-term damaging effect on finances.

Making use of tax-efficient products such as an ISA can help make sure your money is working harder for you, once you have a decent cash savings buffer.

For those rebuilding a safety net of savings, start setting aside money – even small amounts — can make a big difference over time.

Ensure your ISA portfolio is well diversified. When asked about the source of concerns over investing, nearly a third (30%) of women say they don’t understand the different levels of risk and how to minimise the chance of losing all their money.

If you don’t feel confident enough to choose the right investments whether that’s shares, funds, investment trusts, trackers or fixed income, there are ‘ready-made’ packages available from platforms. Alternatively consider a multi-asset fund where the asset allocation is done for you by a fund manager.

Remember, the market is likely to be choppy while economies recover from the pandemic, but over the long term, stock markets historically outperform cash. Use our tools to find the right investment platform or robo-investor for you.

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