Why Financial Planning is Vital for Women

Posted on: 20th October 2020 in Women's Finance

Our ‘women in finance’ series focuses on the financial issues that women face.

From gender equality in the workplace to financial planning, this series takes an in-depth look at key topics of discussion.

Everyone should have a good financial plan, but it’s even more important if you’re a woman.

Women are living longer than men and are more likely to be the primary caregiver to their children. With the gender pay gap still growing, it’s essential that women and financial planning are seen as interchangeable.

Women and financial planning is a challenge

 There are many reasons why so many women typically find it difficult to plan financially for the future. The main issues are:

• Women usually earn less than men
• Women are more likely to give up work/work part-time to look after children
• Typically, men have up to 50% higher pension pots than women (mainly due to being higher earners)
• Finance and investing is often still seen as ‘men’s business’
• Females are statistically more likely to be burdened with looking after an elderly relative

It’s worrying that in this day and age, financial inequality between genders is still very much there. Even though there are schemes in place throughout many industries to even this out, it’s a real problem. It’s a particular problem for women reaching retirement age, who had lived through times when gender pay gaps were even more severe.

Why is it so important for women to plan their finances?

It’s important for everyone to plan their finances, but there are several factors which mean it’s even more critical that women take care of their financial future.

Here’s why:

• Women are more likely to live longer than men. All women need to ensure they can cope financially on their own.
• As a woman, it’s statistically more likely that your other half will earn more than you. Whether you’re currently single or not, you never know what might happen, and financial independence is vital.
• If you’re not earning your own money, you must plan for the future.

How can women plan their finances?

Financial planning for women doesn’t have to be complicated, and there are many things you can do to ensure you have a secure plan. Whatever your income or situation, there are a few essential things you should have in place:

• A retirement plan/pension of your own. Your employer may already cover this, but if you’re self-employed, consider setting up a private pension. Don’t rely solely on a partner.
• Build up your savings. Even if you can only afford to save a small amount each month, make sure you are putting money aside (ideally 20% of your income). Ensure this is going into your own personal savings account, rather than a joint one.
• Never live off a partner’s debit cards. If you provide full-time childcare or live off a partner’s income, always use a joint account or your own. Also, make sure your family has insurance, so you’re covered if your other half is unable to work.
• Make investments if you can. This can sound scary, and a lot of women are afraid of this type of financial planning. Still, it’s worth looking into and can render great returns, when done correctly.
• If you’re in a relationship or married, have access to your finances as a family. Make sure you have all the necessary passwords and paperwork for any joint accounts, pension plans or investments. You never know what might happen in the future. You may need to have access to and knowledge of your financial situation.
• Don’t be afraid to ask for more money. If you take on a new job or get a promotion, have the confidence to show your worth. Go in with a high bracket and show that you’re not prepared to be taken advantage of, rather than asking your employer what they’re prepared to offer. For example, you could say: “With my skills and experience in X, I think I could bring a lot to this role. I think a salary between X and Y would be a suitable starting point. Is this in line with your current budget for this position?”

How to plan if you are the breadwinner

Even if as the female in your family, you have the higher salary, financial planning is still important. You need to protect your income and assets. Here are some things you might want to consider:

• Get a pre-nuptial agreement before marriage. This will allow you to protect your wealth and put you in control, should the relationship turn sour in the future
• Get insurance. Insurance makes sure that your family is covered if you were to become critically ill
• Keep a record of any large financial contributions. This includes contributions that came solely from your income, such as house deposits
• Keep some things you’ve paid for under your name. This may include items such as your car
• Ensure you have a personal savings account

Women and financial planning can sound complicated, but it’s really quite simple. Whatever your income or situation, most of it is common sense. 

As women, there are often more things to consider. Just remember, good financial planning doesn’t need to cost anything and could save you a lot of stress in the future.