Women, investing and the missing £1.65 trillion

Women, investing and the missing £1.65 trillion

First came the gender pay gap, now all eyes are on the investment gap - and this time it’s bigger. A lot bigger.

On average, women have less than half the amount of savings and investments that men do. Every month, they slot away £180 for every £306 set aside by men. Within a year, they’re down by more than £1,500 in deposits alone.

One study reckoned the difference between the average level of savings and investments held by men and women is now £65,000[1].

Men have just over £114,000 - including things like ISAs and cash as well as their pension, though we’re not including property here - while women have less than £50,000. A bit of number crunching suggests that across the whole country we’re looking at a £1.65 trillion gap. Which is a number so big its mind blowing.

But why is it so big? And what can we do to change it?

Of course, the amount of money coming in plays a big part, and Covid 19 hasn’t helped.

As more women took on greater childcare duties or lost jobs in the worst affected industries, the pay gap increased in the year to April 2021 after years of slight improvements, according to official figures from the Office for National Statistics[2].

These days, if you look at hourly rates, men are typically bringing in 13 per cent more than women. The Labour Party now calculates that at this rate the gap won’t close until 2059[3].

And that’s when women are working. Take out the time spent raising families if they choose to do so or caring for relatives - still a job usually taken on by women in a family, and the gap only widens over a lifetime.

But pay is only part of the story. Because once the money comes in, the issue only gets worse.

Cash is precious - especially right now. Most of us don’t set much money aside because we say we can’t afford it, with more women than men saying they don’t have anything left over to invest or save.

Which makes sense given the pay gap, and the well-known tendency for women to prioritise short term household spending over their own long term financial security. The need to buy school shoes comes up a lot, for example.

That puts the number of women with no money set aside anywhere at 15%, but at just 9% among men[4].

In fact, almost the same proportion have a savings account, but the gap starts to grow when it comes to investments - including ISA’s.

So, there’s something else going on here too. And while sweeping generalisations don’t often help, the truth is confidence is a big factor.

After a lack of available money, the main barrier for women to start investing money to build up an independent nest egg is knowledge. Almost a third of the women who don’t invest say it’s because they don’t know enough about it, according to a recent survey by a UK based investment firm[5]. Just a fifth of men agree.

As a result, women tend to go for the least risky options, which usually come with a lower rate of reward in return. And the gap only grows more.

Around 15% say they don’t know where to start with investing and that the financial industry just isn’t set up for female investors - particularly those whose working and earning lives have been interrupted with child and other care responsibilities.

It’s a frustrating position to be in because, study after study, year after year, shows that women make better investors than men.

A survey of more than eight million investment accounts by another UK based investment firm in 2017 found women grew their investments by an average of 0.4% 

more than men, for example[6]. And in 2018 a three-year-long study showed women outperformed by 0.81% more than their male peers every year.

To get started, it is suggested that setting aside just five or ten minutes a week to find out a bit more about the basics - what investments are, how they work, and the risks and potential rewards involved.

That could mean reading articles like the ones here, or guides like those on offer from independent, government back services like MoneyHelper.org.uk, listening to a podcast or watching a video.

Nor do you have to be an expert to get started. Once you’ve got the basics of funds and shares, not only can you start to branch out into exploring other options that may suit you like Peer-to-Peer lending, but you can also get started for real.

With a bit of exploration around the choices available under your belt and confidence that you understand the kind of investment you home in on, including the risks and rewards on offer, the world is your oyster.

This careful approach can also offer a great foundation to start thinking about ways to make the most of your investments, including making the most of the tax-free investment incentives available through ISAs. In 2022/2023 you can put up to £20,000 into ISAs.

There are a range of different types of ISA you can invest in, from stocks and shares ISAs to Innovative Finance ISAs, better known as IFISAs.

These allow you to use your money to invest in Peer-to-Peer lending, where your money is lent to borrowers which then pay back the money with an amount of interest paid on top. easyMoney is an IF-ISA provider.

All the facts and figures presented are accurate at the time of posting.

easyMoney is not a cash savings account. You may not get back the full amount you put in. Your capital is at risk if you invest. Peer-to-peer investments are eligible for an Innovative Finance ISA which is not a Cash ISA. They are not protected by the Financial Services Compensation Scheme (FSCS). Money invested through easyMoney is concentrated in property and could be affected by market conditions. For the same reason, instant access cannot be guaranteed. We do not offer investment or tax advice.

easyMoney is the trading name of E-money Capital Ltd, a company incorporated in England & Wales. Registered office is 5 Fleet Place, London, England, EC4M 7RD (Company No. 04861007). E-money Capital Ltd is authorised and regulated by the Financial Conduct Authority (FCA) #231680.

[1] https://www.headlinemoney.co.uk/Company/Articles/AJBell/AJB_Money%20Matters_Research%20Report%202021.pdf

[2] https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/bulletins/genderpaygapintheuk/2021 

[3] https://www.msn.com/en-gb/news/world/gender-pay-gap-progress-e2-80-98stalling-e2-80-99-e2-80-93-with-10m-women-expected-to-work-their-entire-careers-without-equality/ar-AAQRdl7 

[4] https://www.headlinemoney.co.uk/Company/Articles/AJBell/AJB_Money%20Matters_Research%20Report%202021.pdf

[5] https://www.hl.co.uk/about-us/press/press-releases/women-who-invest-tend-to-outperform-men 

[6]  https://www.businesswire.com/news/home/20170518005645/en/Who%E2%80%99s-the-Better-Investor-Men-or-Women

Written by The easyMoney Team

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