Our mothers and grandmothers typically handled the household finances. They paid the bills, managed the shopping and haggled for the best deals. Yet when it comes to personal finances and investment, women are still not as likely to take the lead.
Massive generalisation? The research tells us it’s true. According to a 2016 report from the Organisation for Economic Co-operation and Development, women have lower levels of financial literacy than men and are less confident in money matters. A 2012 YouGov survey also found that 58% of women claimed a good understanding of financial products, compared to 72% of men.
For millennial women, financial education wasn’t on the school curriculum. But we can’t always rely on our partners, our parents or our workplace pensions. We need to be in the know and, luckily, it’s never too late to take those first steps to managing your money properly without living a life of misery and solitude. At least, that’s what several women financial advisers told us.
Regardless of your pay bracket, there are steps you can take. First, pay off your debt as soon as you can, prioritising the loans with the highest interest rates. (Student debt interest rates depend on the year you graduate. Log in to your Student Loans Company account to check.)
The second step is to build up a cash buffer, and preferably not in your current account, so you won’t be tempted to spend it.
And if you’re in a relationship, now is the time to talk to your partner about money. Research from Relate found that one in 10 people argue with their partner about money at least once a fortnight.
“Start talking about it as early as you can, rather than wait for it to become a problem,” advises Stephanie Hayter, acting chief executive at The Money Charity. “It links to our long-term goals and what we want to get out of life. It’s surprising how often people in relationships have different priorities in terms of their spending and don’t know how much their partner earns.”
Once you’ve done the first three steps, check out the below salary brackets and the top tips from financial experts.
20k
It may sound boring, but budgeting is key for lower earners. Iona Bain, creator of the award-winning Young Money Blog and author of Spare Change, advises women to take a snapshot of their finances over one week and work out exactly what is coming in and what is going out.
“The very basic things that we need every day, like food, are the things we are probably paying too much for,” she says. “Deal with those things first. Plan your ingredients, for example, mix and match from your cupboard, freeze extra portions and take a packed lunch to work. You can make massive savings there alone.”
Carry out the same analysis for everything you buy on a regular basis. Do you need your own Netflix account? Could you cycle to work? Do you really need that gym membership?
“It’s all about choice and there is no right or wrong answer, it’s about your priorities,” adds Hayter.
As soon as you start working, start saving. Bain recommends transferring these cut costs via direct debit to a savings account. The aim is to build up an emergency pot of at least three months’ worth of expenditures.
30k
Savings don’t have to stop at an emergency fund.
Hayter says: “I’d recommend having different pots of savings, like one for emergencies, one for a more specific goal like a holiday, and one for the longer term, so you can keep track of how close you are to each goal and are not tempted to dip into the wrong one.”
If you have a large cash buffer, a cash ISA is a good idea as the interest is tax-free for a maximum of £20,000 per tax year. You can use the £20,000 annual limit to mix and match different kinds of ISAs.
Yvonne Goodwin, a chartered financial planner at Yvonne Goodwin Wealth Management, recommends investing in premium bonds – it’s money that can be accessed instantly, but with a slightly higher interest rate than a bank account. “It’s tax-free and a handy place to park your money,” she says, adding the bonds can be bought from a minimum of £100.
40k
Thanks to the relatively new auto-enrolment pension schemes, you and your employer are both contributing to your retirement. As of April, your employer’s minimum contribution is doubling to 2%, and employees will pay in 3% of their salary. If you haven’t already done so, it’s time to work out what pension money you have where, and how much you and your employer are contributing, if it’s above the minimum rate.
Millennial women may have already worked for several employers since leaving school or university, resulting in a small trail of money with different providers.
Goodwin says the pension industry and the government are still working on a pension dashboard – where you can see everything in one place – but until that happens, she recommends phoning each provider to keep track.
“Keep a spreadsheet with your plan numbers and if you don’t get a statement each year, write to the providers and ask for one,” she says. “If you move to a new house, let them know. They can locate you through your national insurance contributions, too.”
Julie Lord, chief executive of Magenta Financial Planning, has a slightly different approach. She recommends setting up your own pension with a company of your choice.
“I call it a spine pension, as it runs down the back of your working life,” she says. “Choose a cheap one, so when you move jobs you can move that pension into it and consolidate funds. These days, most pensions are cheaper and can be moved around.”
Make sure you take advice before consolidating pensions so as to avoid penalty fees.
50k
Saving for a house? Consider a Lifetime ISA, or LISA. You can invest up to £4,000 per year until you’re 50, and the government matches your savings by 25%, which is essentially free money, according to Goodwin. If you don’t use the savings to buy a house, they become long-term savings and you can access the money at retirement.
If you already own a house, Goodwin says you could consider overpaying on mortgage payments while interest rates are low.
“If you pay maybe a couple of hundred pounds extra on your current mortgage, you could save thousands of pounds and pay it all off a few years early,” she says. “But make sure there are no early repayment penalties. Most mortgage providers allow you to pay up to 10% early.”
60k
Another possibility is to invest some of your cash in the stock market.
“If you don’t need money for three to five years, put it in a long-term investment but keep it flexible so you can dip into it,” says Lord.
You don’t need to be a high net worth individual to have skin in the game. You can invest spare change via apps like Moneybox, and you can invest with Wealthify for just £1. These online companies will invest your money into a diversified portfolio that suits your risk profile. If you’re feeling brave, you could invest directly in companies.
General rules include avoiding panic-selling if the market tumbles – you want to keep that money invested for as long as possible – and add to your investments in smaller, regular amounts. That way, you can benefit from the wonder of compound growth, rather than putting in a lump sum and risking that the market crashes the next day.
“If you’re scared of the stock market, just invest £10 and see what it does,” says Lord. “It will give a great education either way.”
HMRC data shows that 20% fewer women open stocks and shares ISAs compared to men. Yet Sarah Coles, personal finance analyst at Hargreaves Lansdown, said the company’s female client investors beat men by an average 0.81% over three years to August 2017.
“Women who invest overwhelmingly have the knowledge they need to make sound investment decisions,” she says. “And rather than working against them, their determination not to take excessive risks with their investments is one of the things that makes them such good investors.”
Read more money-focused content (minus the boring bits) at On The Money.
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