Why women should invest – and how to start

Official figures show that women are excellent savers, with 10.5 million holding an Individual Savings Account (ISA) in the 2018/19 tax year, versus 9.7 million men¹. Meanwhile, our own survey found women have a lot of financial power – 77% of respondents said they manage their household’s everyday finances, and 68% feel confident doing so².

When it comes to investing, however, women lag their male peers. Only 785,000 women subscribed to an Investment (stocks and shares) ISA in 2018/19, compared with 1.02 million men, with the vast majority subscribing to a cash ISA instead¹. Rather than trying to grow their money, women are far more likely to leave it in cash savings, thereby running the risk of diminished long-term returns and difficulty reaching financial goals.

Here, we explain why women should consider investing, along with some tips on how to get started.

Saving versus investing

Although cash savings are important for short-term goals and as an emergency fund, you could be doing yourself a disservice by leaving longer-term savings in cash. This is because cash ISAs and savings accounts typically offer very low interest rates. In fact, the rates are usually below inflation, which means your money could be losing its real value over time.

Our survey found many women still equate long-term savings with cash, despite inflation in the UK recently soaring to a 30-year high. When we asked women whether they manage their family’s longer-term finances, over half (51%) of respondents answered yes. However, when we asked what they were investing in, a quarter (25%) said a cash ISA whereas only 13% said a stocks and shares ISA².

So, while many women might think they’re doing the right thing by saving for the future, very few are giving their money the opportunity for long-term growth.

What’s your relationship with money? Find out how your finances stack up in our new report.

Consider starting small

When we asked women what was putting them off investing, 54% of respondents said they didn’t have the spare money to invest. There’s a common misconception that you need to be earning vast amounts of money to invest, whereas it is actually possible to start with relatively small amounts. Investing £50 or £100 a month will help you get a feel for investing and build up your confidence. And thanks to the power of compound investment returns, even small amounts of money could grow into a sizeable sum over time, as this article on compounding explains.

Think long term

Another 15% of respondents to our poll said they didn’t invest because it was too risky. Investing is riskier than cash because the stock market can go down as well as up. But with this additional risk comes the potential for greater long-term returns.

It’s really important to think long term when it comes to investing. You must be comfortable committing your money for at least five years, ideally longer. This will give your investments the chance to recover from any dips in performance.

It’s possible to reduce the amount of investment risk you’re taking on by spreading your money across a range of different asset classes. So, instead of investing all your long-term savings in stocks, you could split them between stocks, bonds, cash and property. This can be complicated, so it is best to speak to a financial adviser who will be able to recommend a portfolio of investments to suit your individual needs.

Don’t neglect your pension

Our poll also found that only 36% of respondents were investing in a pension. This is especially worrying as women already face a pension shortfall when compared with men.

Full-time female employees were paid 7.9% less than full-time male employees in 2021, a gap which rose to 16.1% among higher earners³. Workplace pension contributions are typically based on a percentage of your salary, which means that, on average, women’s pension contributions are lower. By the age of 60, women’s pensions are one-third of men’s at the same age⁴.

Saving into a pension is really important for building your long-term financial security. It’s also an extremely tax-efficient way to save, as every time you pay into a pension, the government adds tax relief at your marginal rate of income tax. In England, that means a £100 personal pension contribution only costs you £80 if you’re a basic-rate taxpayer, or £60 if you’re a higher-rate taxpayer.

Trust the experts

If you don’t feel confident about investing, or you’re unsure whether it’s right for you, speak to a financial adviser. They’ll take a thorough look at your finances and recommend the steps you can take to ensure your money is working as hard as you do. It’s much easier than doing it on your own, and it’ll help you rest assured you’re doing the right thing with your finances. For smart advice that’s tailored to you, speak to one of our financial advisers today.

¹ HMRC ISA tables, published June 2021
² Find Out Now poll of 1,063 women, February 2022
³ https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/bulletins/genderpaygapintheuk/2021
⁴ The WealthiHer Report, 2021

The value of investments, and any income from them, can fall and you may get back less than you invested. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. Information is provided only as an example and is not a recommendation to pursue a particular strategy. Information contained in this document is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness.