5 tips to take control of your finances this International Women’s Day

International Women’s Day (8 March) not only celebrates the social, economic, cultural and political achievements of women around the world, it also acts as a rallying call to accelerate equality in all walks of life.

With women’s financial power still lagging behind men’s in the UK as well as around the world, here are five tips to take control of your finances this International Women’s Day.

1. Mind the Gap

The reality of retirement can be very different for men and women. Women, on average, earn less than men over their course of their career, contributing less to pension savings as a result, and often have shorter careers during which to contribute.

The recent Women and Money report from Fidelity International attribute this to the ‘three penalties’ more likely to be paid by women: taking time out of careers for maternity leave; dropping to part time hours or stopping work to offset childcare costs; and caring for aging parents with financial support and taking time off from work.

Fidelity project that the average pension for a man will be worth £142,836 at the State Pension age of 68, while that figure drops to £126,784 for women – almost 11% lower.

Knowing this gap exists gives us the opportunity to address it before retirement. Michelle Pearce-Burke, a leading figure in finance, advises treating saving as your first priority, rather than your last, and the same can be applied to retirement savings. Making increased pension contributions from your salary means the money is saved before you have a chance to spend it – or to miss it. Increasing your contributions every time you receive a bonus or a pay rise is a pain-free way to boost your pension pot.    

2. Shift your Mindset

It can seem like money is the last taboo, and we are unlikely to discuss our finances with our friends, sometimes even with our partners. We might not have grown up in families which discussed money openly, or who were fortunate enough to be able to invest or hold significant savings.

As a result, we might think of financial planning as something that is for other people, but not for us. Fidelity report that women are twice as likely as men to lack confidence in choosing financial products and services, and this lack of confidence can lead to missed opportunities.

The stereotypically male image of stockbrokers and financiers can also leave women feeling excluded. According to the Fidelity report, most women don’t consider themselves investors – however if you hold a workplace or private pension, or a Stocks and Shares ISA, you are already invested in the Stock Market. Bondholders are also investors, albeit in a separate exchange.

Being aware that you already are an investor can cut away some of the mystique and open the door to more deliberate planning and decisions based on your own circumstances. With the plethora of financial products and services available, we can all benefit from taking more control over our financial future.   

3. Assess your Appetite to Risk

Where women do invest in financial planning, we are more likely to behave cautiously than men, often preferring tangible assets such as property to financial products and services.  

HMRC figures show that when investing money in an Individual Savings Account (ISA), women are more likely to choose a straightforward Cash ISA as opposed to the Stocks and Shares ISAs preferred by the majority of men. While a Cash ISA can offer higher interest than a high street savings account, they miss out on the opportunity to take advantage of Stock Market growth. Fidelity cite one example of a difference of almost £17,000 between the return on investment in a Stocks and Shares ISA over a Cash ISA of equal investment value after four years.

That said, there are times where our natural caution can be an asset in investing. Despite only 6% of women investing disposable income in the Stock Market, the Haas School of Business at University of California Berkley has found that we may be more likely than men to enjoy success over the long term. Men were found to trade 45% more often than women, driven by emotional short term reactions, while women were more likely to buy and hold on to investments, behaviour which is more likely to benefit from long term Stock Market gains.

Making a measured assessment of how much financial risk you’re comfortable with and aligning your investment plans with your financial and lifetime goals can make you more likely to achieve success.

4. Assert your Independence

While no one likes to imagine the worst, you might find peace of mind in knowing your financial security lies in your own hands. After all, with women having a longer life expectancy, it’s wise to plan for a time when you rely solely on your own income.

If you’re in a marriage or civil partnership, it’s important to understand what assets each partner holds, their value, and whether they’re held individually or jointly. This can help you assess the financial implications if you’re considering a divorce or separation, and also how you might be impacted by the death of a loved one.

With the age of eligibility for the State Pension continuing to rise, building up your own pension savings will also give you more control over your retirement date. Keep in mind that you may not be able to depend on receiving the full State Pension due to the ‘three penalties’ of time away from work – check any gaps in your payment history at www.gov.uk/check-national-insurance-record and make a plan to counter any shortfall.

The more you understand and control your own finances, the more confidence you can have in a secure future. 

5. Speak to a Trusted Adviser

A 2020 study by the International Longevity Centre (ILC) UK found that women were less likely than men to seek professional financial advice – but that people who do seek such advice tend to be better off in retirement by an average of £47,000.

ILC also found that those who worked with a professional financial adviser felt more confident and more prepared for retirement, with reduced financial stress.

Fewer than one in six people in the UK take professional financial advice, despite the benefits it brings. Whether you’d like help in identifying a target sum to save for your retirement, developing a plan to help get you there or to make sure you’re taking advantage of all the financial opportunities available to you, McCrea are here to help.

We offer a free, no obligation consultation to discuss your needs and how we could help you reach your money and retirement goals. So why not get in touch today and take control of your financial future this International Women’s Day?