Six ways you can protect yourself from the gender savings gap

Are you at risk of falling victim of the gender savings gap? Find out why women need to save more money than men, and six ways you can protect yourself.

When addressing equality, it’s hard to ignore all the noise about the gender pay gap – and rightly so. According UK Gov, in 2021, the gap among full-time employees was 7.9%, up from 7.0% in 2020, with more women than men furloughed or made redundant during the pandemic.

However, what hasn’t been as widely discussed is the gender savings, investment and pensions gaps.

Women generally take more career breaks than men in order to look after family and are more likely to return to part-time work. This ultimately means less money saved up for retirement. Indeed, throughout their working lives, many women will need to consider the impact motherhood could and does have on their finances.

This gap in long–term savings, is even more concerning when you consider that women tend to live longer than their male counterparts. According to Fidelity’s Global and Women Study 2021, women in the UK typically live four years longer than men but have 51% less in retirement savings.

In reality, this means that women need to be saving more – not less – than men. Working later, longer, or harder, or even just buying less, may seem like the only answers to this issue, but there are other ways that women can build a healthier savings pot.

In this article, Kate Palmer, Investment Managers at Rathbone Investment Management has provided some tips to help women prepare financially for the future. 

1) Build a safety net

The cost-of-living crisis remains a big lesson about the importance of have a savings. It’s often recommended that individuals have between three to six months’ salary saved in their bank account as a protection for unforeseen emergencies. While this is not possible for everyone, trying to save a little here and there can build up to a substantial pot in the future.  

2) Save sooner

Saving to be financially secure shouldn’t just be a short-term consideration either. It’s important that young women are thinking about their long-term financial future from an early age. Whatever goals you have will need to be saved for and getting into the savings habit as early as possible will help you to benefit from compound interest. 

Because it works by accumulating over time, compound interest has the potential to turn a small savings pot into a significant amount when left untouched. Meaning every pound saved in your twenties will ultimately be worth a lot more than a pound saved in your thirties, and so on. 

The longer you wait to start saving, the more you miss out on the potential benefits of compound interest.

3) Save more 

Most people don’t realise just how much they’ll need to save in order to have a comfortable retirement. While auto-enrolment has meant that the majority of employees are saving into a pension, it may not necessarily be enough for a comfortable retirement, particularly if you take into consideration career breaks. 

4) Avoid too much cash

One key reason for the expanding gender savings gap is that women tend to hold cash savings rather than investing. Although it’s good to hold some cash for a rainy day, when deposit interest rates are consistently below the rate of inflation, you may actually lose money by holding savings in cash. As we find ourselves battling the highest rate of inflation in over 30 years, it’s important to access how best to increase your return on investment. 

5) Consider investing

When it comes to money, many women turn to saving rather than investing. Over the long term, stock markets have shown historical returns above inflation – the added risk does have the potential for added reward. 

Men tend to accept a higher level of risk with their investments than women, which is more likely to increase their opportunities for growth. However, risk also means that there are no guarantees. The value of your investments can fall as well as rise and you could end up with less than you started with. This is where the long-term view is important.

When you are first starting out in your career you won’t be needing your retirement savings for several decades. You’ll have a longer time to weather the ups and downs of the stock markets, so you may be willing to accept a degree of risk.

You can lower the level of risk you take when you invest, by spreading your money across different types of investment (referred to as your ‘portfolio’). This is called diversification – a diversified portfolio helps reduce the risk of your overall investments underperforming or losing money.

6) Be financially aware

We feel particularly passionate about sharing our knowledge and expertise to increase financial awareness among women. A small change today can make a real difference to your financial future. Across Rathbones we have delivered financial awareness training to more than 10,000 young people and adults over the last six years.

Photo by Alexis Chloe