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Gender differences lead to fewer women investing – how to close the gap

Part 10 of our What, How, When Money series- part of our Financially Fearless initiative for women. We look at the gender differences in investing, and how to help women close the gap.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

Just over one in three HL Stocks and Shares ISAs are held by women.

But women have more financial power than ever before. We’re expected to own over 60% of the UK’s overall wealth by 2025.

So why is there a gender investment gap? And more importantly, what can all women do to close it?

Although this article can provide helpful tips about investing, it’s not personal advice. If you’re not sure if something is right for you, or how to make the most of your investment goals, we suggest speaking to an expert, like a financial adviser.

Problem #1 Women do save, but don’t invest

Women make excellent savers.

We pay into more Cash ISA accounts than men, for example. But less of us add money to Stocks and Shares ISAs.

Getting into the underlying reasons why more women don’t invest isn’t easy. But there are common themes that typically lead to women favouring cash.

For the women who are investing, confidence might not always be a problem. However, for the women who aren’t yet, the confidence chasm can develop into a lack of self-esteem and a general unwillingness to take risks.

Ultimately, the absence of self-belief (and financial industry jargon), can lead to more conservative investment decisions. Which usually equals not investing at all.

Solution #1 Growing your money confidence

If women are unwilling to take risks, and investing is seen only as a ‘risk’, we’re more likely to shy away from it altogether.

Investment risks can’t and shouldn’t be ignored. When you put your money into the stock market, the value can rise as well as fall and you can get back less than you put in. There are ways to reduce your risk while building confidence and momentum.

1. Start small. You don’t need to be putting large sums of money into an investment account every month. You could start off with as little as £25 a month into an HL Stocks and Shares ISA.

Find out more about Stocks and Shares ISAs

2. Think long term. By investing over long periods of time, your money is more likely to weather any financial storms, like dips in the market. Remember though, you’re not ‘locked in’ with an account like the Stocks and Shares ISA. You can take your money out if you need to.

3. Explore funds. Let’s face it, not everyone wants to spend their time researching individual stocks or shares. A fund manager can do this for you. They’ll spread your money across different companies, markets or geographies. This is diversification and can help you manage risk.

Read more about investing in funds

Problem #2 Women face financial gaps men don’t

It might seem obvious, but the individual financial gaps women face also impact gender investment differences. Here’s how:

The Pay Gap – For full-time employees, women in the UK were paid 7.4% less than the average man in April 2020. And we tend to spend more, colloquially known as the ‘Pink Tax’. Although not a real tax, real world data shows that women are paying more than men when it comes to some everyday basics like toiletries.

The impacts of Covid have also disproportionally affected women, with nearly half of women living in London alone seeing a drop in their disposable income. For some, less pay and more expensive living costs might mean less of a likelihood to put savings into an account designed for the long-term.

The Motherhood Penalty – Fewer than one in five women who return to work after children do so full-time initially – we’ll earn even less. Add in extra costs like childcare and there’s no surprise women face an investment disparity.

Solution #2 Invest in your future self

  • Think of the salary you want and compare it to the salary you have now. Investing some of the difference each year could mean you can effectively pay yourself the difference in the future.
  • If you do get a bonus from work, think about using it to top up your workplace pension. You might have the option to waive some, or even all, of your bonus in exchange for a pension contribution, and you’ll save tax.
  • If you’ve taken a career gap in the last six years, you could think about paying voluntary national insurance contributions to increase the State Pension you’ll get when you retire. If you find that even with voluntary contributions you won’t meet the 35 minimum qualifying years to receive the full amount, you could look at saving into a pension yourself to help with any shortfalls. Our HL Self-Invested Personal Pension is one option. Anyone can pay into your pension for you and the government will top it up by £25 for every £100 you put in (contribution limits apply).

When you add money to a pension you can’t usually access it until age 55 (57 from 2028). Tax rules can change and any benefits depend on individual circumstances.

Find out more about the HL SIPP

Problem #3 Women don’t talk about money

Eight out of ten women say they don’t talk about money with those they’re close to. Half of UK adults think that talking about money is a greater taboo than speaking about their intimate relationships, religion or politics.

Fear of rejection, or thoughts of judgement from others, can stop us from opening up. But when we do talk, we make better financial decisions, have stronger personal relationships and feel more in control.

Why two brains are better than one in investing

Solution #3 Break the financial ice

Start having open conversations with friends about saving and investing. You could start by mentioning the goal, and how you’re making it happen. You might find this inspires them to share their own financial goals with you, too.

Similarly, you could talk to your partner about your short, medium and long-term financial goals as well as budgeting and how you share money and pay for bills. If your partner usually has more of an interest in investing, you could suggest managing your own portfolio of funds for the family.

Finally, if you have children, grandchildren, or young family members, talk to them about money. They’ll pick up good money habits from what they see you do.

Encourage older children to reach their own goals with saving and help them to understand how you budget and spend. Don’t be afraid of explaining when things go wrong either. By acknowledging it happens, your children could feel more confident to come to you in the future if they feel anxious about money.

Closing the gender investment gap

Closing the gender investment gap rests in women’s hands. We’re committed to empowering women to invest with confidence, offering the tools you need to close the investment gap.

Sign up to Financially Fearless and join a growing community of women who are taking their financial futures into their own hands.

Be #FinanciallyFearless

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Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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