Mind the Gender Savings Gap!
When it comes to our personal finances it can be hard to know where to start, but Kate Palmer and Hollie Curtis, investment managers at Rathbone Investment Management, are two in-the-know ladies we can get on board with. In this eye-opening article, the dynamic pair explain to us why we need to pay attention to our finances right now!
Grab a pen and paper, because we’re about to get down to business with our personal finances.
What is the gender savings gap?
In light of recent news articles, it’s been hard to avoid all the noise about the gender pay gap – and rightly so. But, what hasn’t been as widely discussed is the gender savings gap.
Throughout our working lives, women generally take more career breaks than men. Plus, we’re more likely to return to part-time work, meaning we end up with a smaller savings pot when we (finally) retire. This taboo issue is further compounded because ladies tend to live longer than our male counterparts. So, we save less and live for longer.
A Prudential study found that women who retired in 2018 would have 29% less money saved than their male counterparts. Working later, longer and harder, or just buying less, may seem like the only answers, but there are other things you can do to build a healthier savings pot and close the gap.
How much is needed?
Most people don’t realise just how much they’ll need to save in order to have a comfortable retirement. Ipsos Mori found that to have an annual income of £25,000 in retirement you’ll need to accrue at least £315,000 (when supplemented by the state pension).
But when Britons were asked, the median answer was worryingly below the true value needed, a mere £124,000. (Ipsos Mori (2017) Millennial Myths and Realities).
So, what can you do?
Women should start saving as soon as they can, every little helps. Compound interest means every pound saved in your twenties is ultimately worth a lot more than a pound saved in your thirties, and so on. This is because compound interest is interest that you earn on the interest that’s already built up on your savings.
Because it works by accumulating over time, compound interest has the potential to turn a small savings pot into a significant amount when left untouched. Therefore, the longer you wait to start saving for retirement, the more you miss out on the potential benefits of compound interest.
A recent report found that women could close the gender pension gap by dedicating only 1% more of their salary towards their retirement early in their careers. A small change today can make a real difference to your financial future.
Avoid too much Cash
Another reason for the expanding gender savings gap is that women tend to hold cash savings rather than investing.
Everybody should aim to hold some cash for a rainy day, but when deposit interest rates are consistently below the rate of inflation, you’re actually losing money in real terms by holding too much in cash.
For longer-term goals, such as saving for your retirement, you may want to consider investing in stocks and shares. Over the long term, stock markets have historically shown returns above inflation – the added risk does have the potential for added reward. However, according to YouGov, only one in five women currently hold an investment versus one in three men.
On top of this, men also tend to accept a higher level of risk with their investments than women, which is more likely to increase their opportunities for growth.
However, risk also means that there are no guarantees. The value of your investments can fall as well as rise and you could end up with less than you started with. This is where the long-term view is important.
When you are first starting out in your career you won’t be needing your retirement savings for several decades. You’ll have a longer time to weather the ups and downs of the stock markets, so you may be willing to accept a degree of risk.
You can lower the level of risk you take when you invest, by spreading your money across different types of investment (referred to as your ‘portfolio’). This is called diversification – a diversified portfolio helps reduce the risk of your overall investments underperforming or losing money.
Be Financially Aware
So what are the factors that make women less likely to invest than men? A lack of confidence and knowledge about investments?
We feel particularly passionate about sharing our knowledge and expertise to increase financial awareness among women; banishing the outmoded concept of Mr Bennett managing the family finances, while Mrs Bennett drinks tea and teaches Elizabeth to embroider quilts.
Across Rathbones we have delivered financial awareness training to more than 10,000 young people and adults over the last six years.
Come and Meet Us
The Rathbones Winchester office is 35 strong with 20 investment professionals, including five fabulous women – Hollie Curtis, Georgina Hand, Kate Palmer, Justine Peck and Emma Watson.
If you would like to discuss your financial plans or are simply interested in attending one of Rathbone’s financial awareness courses, call the team on 01962 857 000 or visit rathbones.com/winchester for more information.
Financial planning services are provided by Rathbone Financial Planning, part of Rathbone Investment Management Limited. Rathbone Investment Management Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.
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