Written by 9:31 am Investing

Who funds the world? Why women need to start investing

About 7 minutes to read

When it comes to money, women are still more likely to save than to invest. 

According to the data, the majority of women don’t invest in the stock market. Most don’t actively top up their pension contributions, nor do they utilise the tax-efficiency of a stocks and shares ISA*. In fact, as many as 70% of women keep their money in cash or uninvested. 

Then there are trends such as less time in the workplace, income inequality, divorce, and living longer. The combined effect is not just a significant lack of financial confidence, but financial losses too. Some estimates suggest that on average women miss out on as much as £1 million over their lifetime.

Now, I know we’ve discussed this several times this year, but with the pandemic impacting women disproportionately more than men, there’s a greater need than ever to create equity within finance. According to the WealthiHer report, which champions the economic advancement of women worldwide, in the last year the gender divide has widened and progress in the workplace – including pay parity – may have been set back by as much as three decades. 

“The impact of Covid-19 is a crisis like no other,” reads the report. “The damage done to women could last for years.”

This is despite more wealth being controlled by women than ever before. 

In fact, whilst women are more negatively impacted by the pandemic – with their self-esteem and financial confidence and security all suffering – the amount of money that women manage is growing fast. According to Kantar, around 60% of wealth in the UK will be in the hands of women by 2025. Moreover, in the much-anticipated Great Wealth Transfer – which will see around $59 trillion passed on from baby boomers to their Gen X and millennial inheritors – women are tipped to be the primary beneficiaries. 

There’s never been a more important time to empower women to take ownership of their finances. But to do that, more women need to start investing. 

So where should we start? 

*Tax treatment depends on your individual circumstances and may be subject to change in the future.

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Ignore the myths, look past appearances

Despite what traditional financial services might suggest, money has never been the exclusive domain of men. Far from it. Because it’s not just our own money that we typically manage. From personal to household finances, individual to family decision-making, women are involved in money at every level – looking after dependents, making choices for our families, and also taking care of ourselves. 

“Women are the single largest productive economic force, and drive almost every economic indicator for businesses. But that’s not the impression we get when we read economic data or view advertising,” writes Danielle Kayembe in her seminal article for Refinery29. “Based on statistics released in 2015, women collectively represent the second largest economy in the world based on earned income vs GDP.” 

When it comes to investing, the stats similarly speak pretty loudly. If investment providers engage more meaningfully with women, boosting our levels of financial engagement and confidence, the results have the potential to generate a further £12.4bn from millennial women and £24.4bn from Gen X women. 

Investing is not a male-only opportunity. According to analysis by Warwick Business School, women outperform men at investing; for instance, their study shows that the annual return made by men who trade in shares and funds was just 0.14% above the FTSE 100, while women made an average annual gain 1.94% above the FTSE. 

We can be just as – if not more – successful as men when it comes to investing our money and growing our wealth. We just have to take that first step. 

After all, why should boys have all the funds?

Challenge the doubts 

For International Women’s Day this year, the theme is Choose to Challenge. And if you’re going to challenge anything, it really ought to be the confidence gap – especially when it comes to your money. 

Financial confidence underpins so many of our decisions, including our choices around savings and investment. It affects all of us, of all genders, but may account for why women aren’t investing at the same rate as men, choosing to hold cash rather than to open an ISA or general investment account. Saving can look like safety, but in some instances, it can hold us back and stop us from growing our wealth over time. 

Starting with smaller investments that you can easily access or seeking out platforms that provide fully managed portfolios may help if your confidence is low. At ikigai, for example, we aim to ensure that our clients always feel in control of their money by ensuring their investments are just as visible as their everyday spending and saving accounts. We also offer tools like the Money Splitter so that with each payment into your account, you can easily divide into spending, saving and investing. It’s all about ease and visibility, empowering people to look after their financial wellbeing – growing their confidence and their money. 

Start talking about investing

If the most powerful thing you can do is talk about money, the second most is to get specific with it and focus on investing. 

And given that several studies have now shown that around two thirds of women are now more focused on their finances as result of the pandemic, there’s never been a better time for women to really start owning their part of the investment conversation. 

Talking about money can boost your confidence, alleviate your fears, help you learn and develop, fine-tune your goals and even better understand yourself and your relationship to money. When it comes to investing, communities are out there. Support exists. Meetup, the online networking site, has said there are now over 150 groups focused on women and investing, driven by increasing demand for interaction and support. As we’ve previously noted, there’s a significant rise in social media channels focused on changing the narrative around women and investing. And there are always financial advisors you can talk to as well – with new platforms for female investment advisory launching all the time. The important thing is to find someone to talk to, whether that’s a friend, partner, peer or professional. 

Or, as Helena Morrissey, founder of the Future World Gender in Leadership (GIRL) fund, says, “Don’t be afraid to talk about money and find a role model to motivate you.” 

Set your goals 

No one knows your relationship with your finances better than you. No one can tell you how spending money or saving money makes you feel; whether the new laptop was worth it for you, or if the coffee subscription is a nice-to-have or a must-have in your life. 

But equally, no one knows your goals like you do either. Think about what life you want to lead, what lifestyle you want to achieve. This is what your money is really about. Not abstract numbers in an account but your future and ambitions. They might look different to what you find on investment sites, but that’s okay. As women, we tend to approach things according to our values. 

As Catherine Morgan, founder of The Money Panel, told Stylist, “[Most platforms] focus on ‘investment returns and performance’. Instead, the focus should be on how it can help us to reach our goals. Not just ‘retirement goals’, but goals to maintain our lifestyle and income.” 

Investing helps you save yourself and your future. But it can still be a difficult step because it isn’t just about the money. It can involve a lot of emotions too. If you’re unsure about where to start or what type of investing is right for you, then flip the narrative for yourself. Consider your goals first and then reflect on what you need to achieve them. Put a priority on your values. You can then do your research on options, platforms, risk types and so on from a more deliberate perspective. It’s not about investing for the sake of investing. It’s investing to achieve something. And that makes it easier to work out what’s right for you and your money. 

Accept that you may take a different attitude to wealth

There’s a common perception that women are more risk averse and therefore less likely to invest. But this is all a bit of a myth – or a socially-fulfilled prophecy. 

When men and women are spoken to about money, they’re spoken to very differently. As Erica Buist explains, typically, women are spoken down to, told to scrimp and save and reign in our ‘shopping habits’. We’re given ‘tips and tricks’ to keep us on budget. We’re not taught to invest. On the other hand, men are far more likely to be spoken to about portfolios, calculated risks, or to be told that financial success enhanced their status as a man. The impact is that women’s confidence can be undermined, whilst men may feel propelled to take bigger risks that they’re actually comfortable with. There’s a lot of social bias and everyday sexism at play that all genders need to work through, especially when just starting out as an investor. 

 “Women are cautious and often believe investing is too risky. But investing is not akin to gambling and it isn’t all that complicated once you get started,” Morrissey told Good Housekeeping. “It can take time to build wealth, but think of it in the same way as exercising – you don’t just become a marathon runner overnight.” 

Understanding your risk tolerance is important. After all, risk underpins the very nature of investing. But whether you are more risk-averse or less so, it’s important to accept where you’re at. You’re not wrong or right for wanting to be more cautious or less so, as long as it’s in line with your tolerance and appetite for risk. 

Women’s wealth will change the world

There is no doubt that women are a force to be reckoned with financially. We represent a growing economic power, controlling more wealth than ever. 

We are changing the world with our financial choices – not only giving rise to a female-driven economy, but also tacitly voting for the world and future that we want via our wallets. In fact, we’re far more likely to invest in line with our values than men, looking to drive positive social and environmental change along with financial return. 

But we can’t take female financial empowerment for granted. The pandemic has demonstrated how fragile the progress towards financial freedom may be, and the consequences of Covid-19 will outlast any and all lockdowns. The UN has said that the recovery efforts must include a focus on supporting women – emphasising how governments and businesses can provide direct income, support for women-owned and led businesses, protect women workers and informal workers, as well as start to reconcile paid and unpaid labour in order to promote a more equitable future. 

There is now an opportunity – and a challenge – to ensure that conversations around women and money, pandemic recovery and the future are aligned. And if more women invest, this topic becomes unavoidable. 

Investing is a step that every woman can take to further take control of her finances and plan for her future. It is also a form of power, ensuring that women and their values are platformed equally alongside those of men. 

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We built ikigai specifically for those who want to bring their lifestyle to the next level, by taking better care of their finances.

ikigai beautifully combines wealth management and everyday banking in one single app. And by doing so, it creates a whole new world of opportunities.

Visit https://ikigai.money to find out more.

Maurizio & Edgar, Co-Founders, ikigai

When investing, your capital is at risk.

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Last modified: 11 March 2021