Female Investors – why are women more likely to save than invest?
When it comes to how we handle our money, research shows that women are more likely to save than invest. We asked one of our female writers to investigate why this is the case.
Many of us have heard of the gender pay gap. In the UK, there’s an 11.9% disparity between how much men are paid versus women – with women getting the lower end of the deal.
Another concerning gender gap exists when it comes to the world of finances – the ‘investment gap.’
In the UK, far less women than men make financial investments.
- Only one in five women have at least one investment versus one in three men.
- There is a 40% gap between what women invest in their pension funds versus men.
- Only 13% of stocks and shares ISA’s are owned by women – with women favouring cash ISA’s.
Given how financially independent women are today, this seems shocking, however, the figures transcend across the generations, from millennials to octogenarians. Most of us aren’t investing!
Women save better than men
Where the figures on female investors are relatively low, the opposite is
true for savings accounts. Research suggests that women save a much higher proportion of their pay and are better savers than men.
What effect might this have on our financial futures?
While being better at saving is no bad thing, due to the gender pay gap, we are only investing a higher proportion of our income – so in total still saving less than men, Also, the fact that we seem to be more focused on investing in cash, which generates a much lower, slower return than investment funds, means we are missing out on potentially more lucrative returns. Continuing this way, particularly when we have a longer life span than men, means the financial future doesn’t look great for us!
What stops women from investing?
Similar factors have been identified among various reports into why there aren’t more female investors and why generally women don’t invest. As someone who only plucked up the courage to invest recently, I can concur that the following factors have put both myself and some of my female peers off from investing, up to this point:
- Less income to invest
Compared to men, we do generally have less disposable income to invest. There’s the gender pay gap, needing to save more to have a similar level of security as men during our retirement, then add to this the fact that we often face a ‘motherhood penalty’ during our careers, there is added pressure on us to earn more, which leaves a smaller amount available to invest.
Many women, like myself, feel that in order to become an investor, you need to have lots of money to invest when, in fact, sometimes the best investors start small.
- Financial marketing
While not all financial marketing is failing us, when you look at advertising in general, the majority of investment products do seem to target men, whereas savings products appear to target women more.
- Negative perception of investment
Before starting out as investors, my friends and I had a certain perception of the world of investments and finances, backed up by the media and certain finance people we’d met along the way. Pre-investing, I’d decided that it was deathly dull and that, if I plucked up the courage to speak to a financial advisor, I’d be confused or bored by their jargon.
It didn’t help that I had never met or heard of a female financial advisor or investor before.
I’m pleased to say I’ve since been proven wrong!
- We’re more risk-averse
Studies continually show that, when it comes to money, women are more averse to taking risks than men. The Financial Times reported that men were almost twice as likely than woman to agree that ‘taking a risk when investing is important to achieving investment returns.’ Given that we have to work harder to reach the same levels of financial security and freedom as men, it’s no wonder that many women choose to take ‘less of a risk’ and invest in cash savings accounts, rather than higher stakes investment funds.
- Lack of knowledge and financial education
According to the Financial Times, 40% of women said they were ‘less knowledgable about investing compared to others,’ versus 30% of men. I don’t mean to do my gender a disservice; I know there are women out there who have great financial knowledge. In the main though, there seems to be a lot of us left feeling that we don’t have the financial knowledge or acumen to enter the world of investment.
Growing up, financial independence to me meant owning your own home; stocks and shares were never mentioned. It’s not a conversation I’ve felt able to have with my peers until recently; it’s a topic of conversation we tended to avoid.
- Lack of confidence
Left feeling like we lack the funds, nous, contacts and even the right answers to succeed, is it any wonder that many of the women I’ve asked have said that, while they would love to start out on their investment journey, they simply lack the confidence to do so?
So what can be done to stop this?
There’s a lot to be done to make investing feel more accessible to women and to help us break down the perceived barriers that we’ve helped to put in place to stop us from investing (that’s a whole other blog post in itself!)
Personally, I find financial jargon quite off-putting, as is the sheer number of different financial products out there. Perhaps one way the industry can change is to focus their efforts on using less jargon and demystifying the process with financial education.
I’m interested in becoming an investor, where do I begin?
Start the conversation! I began by talking to my peers about my investment intentions and then speaking to a financial adviser.
Research independent financial advisors in your local area – ‘independent’ is the most important, as you want a completely unbiased view.
Be completely open and honest about your goals, finance you have available to you (however big or small) and just get started!
And that is how I overcame my fear of taking a risk and became a super investor…(just kidding, but watch this space!).
Carrick Financial Management are a team of independent financial advisors. We’re here to help you to make the right choice when it comes to your finances and choosing the right investment fund. We won’t bore you with jargon and we don’t presume any prior knowledge.
If you are looking for straightforward, transparent and trustworthy advice, give us a call on 0191 217 0007 or email firstname.lastname@example.org.