Reviews and Ratings for Financial adviser Chris Wheatman, Lancaster

Women are investing earlier than men, and it could close the wealth gap

The gender wealth gap is a widely acknowledged issue in the UK, particularly in the context of pension savings and women’s ability to retire.

Indeed, a report by Now Pensions and published by consumer group Which? suggested that on average, women would need to work an additional 18 years more than men to close the gender pension gap alone.

Yet fascinatingly, according to research published in FTAdviser, women are actually investing their money earlier in their lives than men.

This research may come as somewhat of a surprise, as the gender wealth gap has been widely proven. In fact, previous research carried out by the Royal Mint in October 2021 suggested that women were less likely to invest, finding that:

  • Just over a quarter of women said they regularly invest, whereas more than half of men said they did
  • Only 37% of surveyed women said they understood the basics of investing, whereas 56% of men said the same.

So, find out the details of this new research, and how women investing sooner could ultimately help to reduce the size of the gender wealth gap.

Women start investing aged 32 on average

According to the research published in FTAdviser, women are starting to invest at an average age of 32. Meanwhile, men don’t start investing their money until age 35. Overall, the study found the average age people start investing to be 34.

Across age groups, people stated that they broadly had the same goals for investing, including:

  • Feeling “financially stable” and having “necessary financial liquidity”
  • Having enough to maintain their lifestyle in retirement, after realising that the State Pension would probably not be enough to do this on its own
  • Seeing friends and family around them invest.

At the other end of the spectrum, the survey also discovered the biggest barriers to investing that both men and women faced were:

  • Having spare money to invest – 53% of survey respondents stated that they didn’t have money left over to invest after spending to live their lifestyles.
  • Having the knowledge needed to put their money in the markets – 27% of respondents thought they were too young to invest, while 26% simply didn’t realise that investing was important.

So, while women are managing to put their money in the markets sooner than men, there still remains an issue of many people feeling uncertain about doing so themselves.

Closing the gender wealth gap

The upshot of women choosing to invest earlier is that it may be an effective way to close the wealth gap that exists between men and women.

Consider this example. Imagine that a 32-year-old woman invests £20,000 across a range of assets, holding her investments in a Stocks and Shares ISA so that they’re entirely free from Income Tax and Capital Gains Tax (CGT).

Let’s assume that she manages to generate 4% annual growth on her investments after any costs and charges on her account. She then also invests a further £5,000 each tax year.

Based on these figures, this woman would have investments worth £38,105 (rounded to the nearest whole pound) by the time she turns 35.

For the average man investing at 35, this means he’ll be £3,105 worse off, even if he invests the same £35,000 that this woman has invested so far.

These effects become even more pronounced over longer periods of time, even if you invest the same amount as someone else just one year later.

According to investment provider Hargreaves Lansdown, there’s a discrepancy in investment returns if you start investing in a Stocks and Shares ISA at the end of the tax year, rather than at the start.

This example assumes that two people invested £5,000 each year from 1999 to 2022. However, one invested their money on the first working day of the tax year (running from 6 April to 5 April) while the other did so on the last working day.

Using historical market data, the individual investing on the first day would have had £259,625 in their account by March 2022, based on historical Lipper Investment Management data. Meanwhile, the other would have had £249,381.

That’s a difference of more than £10,000, despite only investing a year apart from one another.

All in all, by choosing to invest sooner than men, women are giving their money the opportunity to grow in the markets, reducing the size of the wealth gap by making up the difference in investment returns.

Overcoming the barriers to investing

Whether you’re a man or a woman, you can see these figures demonstrate the importance of overcoming those investment barriers and the potential advantages of putting your money in the market sooner rather than later.

Not having spare money to invest is an understandable and tricky issue, but it’s far from insurmountable. For example, creating a budget with all your income and expenditures may help you to identify areas where you can cut back on your spending, allowing you to set money aside specifically for investing.

Better yet, working with a financial planner can be transformative, giving you a mathematical breakdown of what you can afford to invest and how doing so can help you towards your life goals.

Meanwhile, financial education may be an easier problem to overcome. There are plenty of resources online you could use to boost your investment knowledge.

Again, working with an investment expert can make a huge difference. As a financial planner we can explain difficult concepts to you in simple language, helping you to make informed decisions with your money.

We can also invest your money on your behalf, giving you the confidence that an expert has a handle on your investments.

Get in touch

Whether you’re a novice investor or a seasoned veteran, you could benefit from investment advice.

Get in touch with us today to find out how we can help you.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

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