Why Women Need to Take Charge of Their Money Now

According to the BBC, eight out of ten companies are paying men more than women. There is a 40.5% difference in pension income for women compared to men representing an annual £7,100 shortfall. Women need to take charge of their money now so that they can invest and secure their financial future.

Barriers to Women Taking Charge of Their Finances

Women and the Financial Literacy Gap

Financial literacy is understanding how to manage your money and invest for your future.

Despite all the achievements of women in areas such as politics, business, arts, and culture, many still struggle to understand personal finance.

The  2019 Women, Money, and Power Study, found that women were experiencing declining financial confidence in several areas per below:

A study by DIW Berlin on the gender gap in financial literacy found that it is not only caused by individual differences and different financial experiences but also by country-specific characteristics and a country’s culture.

Women Still Have Less Retirement Income Than Men

The Goldman Sachs Women and Retirement Survey conducted in Dec 2022 found that:

1. 80% of retired women have an annual income that is less than 70% of their pre-retirement income.
2. Women are impacted more by competing financial priorities, life events and planning assumptions than men.
3. More than 60% of women retired earlier than they originally planned.
4. 66% of women retired for reasons beyond their control.
5. Despite being anxious about managing their own money 69% of women still do. However, more women than men reported seeking the advice of a financial advisor.

Caring Responsibilities

A study, What Women Want, by the Centre for Progressive Policy (CPP), found that:

• women in the UK provide 23.4 billion hours (worth £382 billion) of unpaid childcare vs 9.7 billion hours (worth £160 billion) provided by men.
• more hours of unpaid care to an adult are provided by women (valued at £50 billion) than men.
• women ‘are disproportionately the ones making sacrifices in their careers to meet these caring responsibilities, contributing to gender pay and pension gaps and resulting in financial insecurity, uncertainty, and instability for millions of women across the country.‘
• 830,000 women who care for an adult are prevented from working due to their caring responsibilities.
• Of women who were providing;
  • unpaid childcare, 26% had reduced the hours they worked and 20% wanted to work more but childcare responsibilities prevented them from doing so.
  • unpaid care for an adult, 20% of women had reduced their hours of work.

The What Women Want study shows that flexible working arrangements would provide up to 5 million more women with new opportunities to work and increase the earnings of female carers by up to £28.4 billion annually. This would also boost the UK economy by over £60 billion per year.

Adding to the burden is the fact that childcare costs in the UK (highlighted in red) are the fourth most expensive in the OECD per the chart below:

How Women Can Build Wealth

Improve Your Financial Literacy

Education

You need to self-educate to understand personal finance and investing. So, how can you do this?

1. Read books such as:

• A Random Walk Down Wall Street, by Burton G. Malkiel
• One Up on Wall Street by Peter Lynch
• Your Money or Your Life by Vicki Robin and Joe Dominguez
• The Intelligent Investor by Benjamin Graham
• The Simple Path to Wealth by JL Collins

2. Listen to financial podcasts. You can find many of them on YouTube. Listen to anything featuring Warren Buffett and Charlie Munger for example.

3. Read financial blogs like Inquisitive Finance

4. Read newspapers such as The Financial Times

5. Take courses on personal finance and investing. There are lots of free and low-cost courses available for example, through EdX, Coursera and YouTube.

Professional Advice

You may wish to seek the advice of a qualified financial advisor who specialises in working with women.

The financial advisor will take information such as your income, expenses, any debt you have, any savings or pension you have and what your financial goals are.

They will work with you to create a plan to help you reach your goals.

Set SMART Financial Goals

SMART stands for Specific, Measurable, Achievable, Realistic, and Time-bound. If you use this framework it will enable you to set, measure and track your goals.

• Specific: Your goal must be specific. For example, you could say ‘I want to clear £20k in consumer debt in the next 12 months’ or ‘I want to save £30,000 for a deposit on a house’.
• Measurable: Your goal has to be measurable, so you can track and monitor progress. For example, say you want to max out your ISA which has a £20k annual limit. You would save £1,666 each month to achieve that.
• Achievable: Your goal must be attainable. You need a clear plan on how to achieve your goal and then work towards it.
• Realistic: Your goal has to be realistic, given the time and resources available to you to achieve it. For example, say you have £4k in consumer debt. If you cut down on going out from 4 to 2 times a month this saves £200/month. So, you could pay off £4k consumer debt in under 2 years.
• Time-bound: Your goal must be time-bound. It must have a start and finish date. For example, say you want to save a £20k deposit for a house and you can save £500 per month. You plan to start on 1st January 2024. If you continue to save you will reach the £20k goal by 1st April 2027.

Make a Budget

One of the best ways of taking control of your money is to budget. Once your money comes in each month, give every £,$ € (or whichever currency you earn money in) a name which gives direction to where the money is going.

Say you earn £4k/month net, having already contributed to your pension from your gross income. You are diligent and clear your credit card debt every month so have no consumer debt. You can budget per the table below.

How many of you have said to yourselves at the end of each month “Where has my pay check gone?’. Budgeting should help remedy that, as long as you stick to the budget.

If You Are a Carer

Look for flexible working conditions to enable you to work and care for your child or an adult.

Claim support from the UK government such as:

Universal credit childcare: You pay for childcare costs to enable you to work or increase your hours. You can claim 85% of childcare costs back from Universal Credit. The maximum amount you can claim each month is £950.92 for one child and £1,630.15 for 2 or more children.

There are many other childcare support schemes available for you to potentially claim.

Carers Allowance where you could get £76.75 a week if you spend at least 35 hours per week caring for an adult and they get certain benefits or

Carers Credit is a National Insurance credit that fills in gaps in your National Insurance record. This is important as the UK State Pension you get on retirement depends on your National Insurance record. You need to be caring for an adult for at least 20 hours per week to claim it.

Upskill, Retrain and Educate

When you upskill, retrain and educate yourself in your field, you become more valuable. As you will add more value to any company/department that you join, you will earn more money. The value you add increases your earning power.

Build Credit History

Your credit score is important as it shows lenders how creditworthy you are. This is important for example, if you are applying for a mortgage. The higher your score the better the mortgage interest rate you should get.

You can check your score on Checkmyfile which checks your credit data from Equifax, Experian and TransUnion.

Invest for your future

• You don’t need much money to start investing. You can start with as little as £100 per month.

• Open an ISA or a LISA (if you are under 40). It is a very tax-efficient way of investing.

• Invest in your pension to ensure you have a comfortable standard of living in retirement.
• You may also wish to invest in real estate. Ensure you understand the pros and cons of buy to let before investing.

Invest for the future of your family

• If you have a child, you could invest in a Junior ISA. This will help pay for university later or help your child fund a deposit for a house, set up a business etc.

• You may also open a Junior SIPP for your child. This will help build your child’s wealth for their retirement.

Buy Life Insurance

If you pass away, Life Insurance ensures that your family will be taken care of.

Write a Will

You must write a will to ensure that your money is passed on to the people who you want to inherit it. If you don’t write a will, your money, and assets, such as property or shares, will be distributed according to intestacy rules rather than your own wishes.

Writing a will may also help reduce inheritance tax (IHT) which is a tax on your estate if you die. IHT is currently 40% in the UK and is chargeable on assets over the threshold of £325k.

The Benefits of Taking Charge of Your Money

Once you have control over your money you will reap lots of benefits:

Financial Goals: You can achieve your financial goals such as getting out of consumer debt, saving for a deposit for a house, starting a business, or maybe retiring early.

Mental Health: When you are in control of your money your mental health improves. You have less or no consumer debt, you are more secure financially, and you are investing in the stock market or real estate and actively working to secure your financial future. This reduces your stress and anxiety and improves your overall mental health.

Freedom: Financial freedom gives you options such as working part-time, changing your career completely, taking time off to travel for a few months, or starting a new business.

Education: You have money to access the best courses at the best universities or perhaps take a professional course like ACCA. Additionally, you can afford to take the time off to attend university full-time if you wish.

Why You Need To Take Charge of Your Money

Women need to take charge of their money now to secure their financial future.

By improving your financial literacy, setting SMART financial goals, budgeting, and investing wisely, you, as a woman, can build wealth and achieve financial independence and peace of mind.

If you have any comments or questions on this post, please share in the Comments section below.

Thanks for reading!

DISCLAIMER: Inquisitive Finance operates on principles of exchange of knowledge, ideas and opinions and learning in the community. Your decisions are entirely your own responsibility, and I am in no way responsible for your actions. I am not a financial advisor. Whilst I strive to provide accurate and up-to-date information, I make no warranties or representations as to the accuracy or completeness of this information. Use common sense, do due diligence and where necessary, use the services of a licensed financial advisor, before making any financial decision and/or transaction.