Irish Times
Sandra O’Connell
16th February 2023
We may be in age of equality but there’s little that is equal in women’s finances, writes Sandra O’Connell
We may be in the age of equality but there’s little that is equal in women’s finances, even before you delve in to the gender pay gap.
While the principles of good financial planning are the same for everyone, regardless of gender, there are some factors specific to women that make financial independence harder to achieve, says Una Jennings of Provest in Cork, which specialises in financial planning.
Women tend to live longer so need to build up greater financial reserves to manage this.
Yet the opposite happens in practice, not least because many women take extended periods of time off to raise children, she says.
Long periods of parental leave mean women are not in receipt of income, so probably making pension contributions either.
But the motherhood “penalty” is not the only one, she says. “Another is the ‘good daughter’ penalty, where more women may take time off work to look after elderly parents.”
The financial services industry has long identified that women tend, on average, to be more risk averse than men when it comes to investment products
Even menopause can have a detrimental impact on women’s financial wellbeing, says Jennings, as it is often cited on income protection claims as a factor forcing women to take time out of the workplace.
It all adds up. Or rather, it doesn’t.
Then there are the consequences of the different ways in which women invest their money.
The financial services industry has long identified that women tend, on average, to be more risk averse than men when it comes to investment products. Yet greater risk typically leads to greater rewards over the long term.
Women are also more likely to invest in environmental, social and governance (ESG) focused funds, which may lead to lower returns compared to non-ESG-focused funds. If there is a trade-off it’s one that is, hopefully, better for the environment, but possibly worse for their wallet.
“Surveys have shown that 71 per cent of women take ESG into account when investing, compared with 58 per cent of men,” says Jennings.
So what can women do?
They can get proactive about financial wellbeing – and fast. “We recommend people start their pension pot as soon as they start employment,” says Jennings.
According to Bank of Ireland’s annual survey of financial wellbeing, women feel less confident than men about managing money and aren’t as happy with their financial circumstances.
Where financial advice is concerned, women are more likely than men to want guidance on savings
According to the research, 50 per cent of women said they were confident managing money compared with 56 per cent of men. Women reported being less satisfied with their financial situation (29 per cent versus 33 per cent) and less knowledgeable about financial matters (28 per cent versus 36 per cent).
The difference between the sexes is greatest when it comes to having the confidence to choose investments (15 per cent versus 27 per cent) or pensions (16 per cent versus 27 per cent) without the help of a financial adviser.
Where financial advice is concerned, women are more likely than men to want guidance on savings (76 per cent versus 66 per cent) and meeting financial goals (71 per cent versus 61 per cent) but they’re also more likely to think they do not understand enough about finances to talk to a financial adviser (19 per cent versus 13 per cent).
A snapshot from the latest research from Bank of Ireland conducted by Red C in 2022 highlights that women are less confident that they have saved for long-term goals – 72 per cent of women versus 67 per cent of men.
The bank also scored respondents based on their saving, spending, borrowing and planning. The biggest gap between women and men across the four metrics was in relation to their saving (for near-term expenses and long-term goals) where women scored 49 out of 100 compared to a score of 55 for men.
“Financial wellbeing is a person’s ability to confidently manage their finances and plan for the future, regardless of how much money they have. The principles of good financial wellbeing are the same for everyone, but the obstacles are greater for women,” says Dawn Bailey, head of financial wellbeing at Bank of Ireland.
“It is clear from the research that we conduct each year that finances remain a cause of worry for our customers, particularly women. It also tells us that women want to learn more about finances but are less likely to ask.”
Financial adviser Carol Brick set up HerMoney.ie in 2016, after many years working in the sector, because she was alarmed at the number of high-earning women she met who had no idea how much was in their various pension pots, nor even where those pensions were.
“I get it. They have too many plates spinning being the managing director at home too, shopping and cooking and all the rest. But the risk is that they leave the financials to their husband,” she says.
Recent research from Banking & Payments Federation Ireland (BPFI) found that more than 20 per cent of women aged 18-34 do not have control over their finances and are more likely to rely on others for help with their money.
“Very often these are women with at least one dependent, not working outside of the home, who don’t own any assets independently and typically have no access to bank accounts and credit cards even,” says Brick. “The definition of a financially dependent person is one with low or no income, and little or no savings.”
In cases where a husband is simply not keen to share information about the family finances, women are particularly vulnerable. It may seem a term from a bygone era, but having your “running away” money can still matter, she says.
Financial dependence is certainly an issue she sees when dealing with women who come to her for financial advice in cases of separation and divorce.
“Very often they have no clue about their figures, about how much they would need to run the household. And we do see clients who stay in a relationship because they know they can’t survive outside of the four walls financially, and suffer mentally because of that,” she says.