Only 45% of women feel financially independent, according to new findings – and it’s having an impact.
The survey by Fidelity International (fidelity.co.uk) suggests two-fifths of those who do not consider themselves financially independent feel unable to make their own life choices. Some of these women said they were dependent on a partner’s income, while others had outstanding debts.
Nearly half of the respondents cited the high cost of living as the biggest barrier to improving their finances – an issue that’s likely to become even more pressing, as bills rocket.
Alice Haine, personal finance analyst from Bestinvest (bestinvest.co.uk), isn’t surprised by the stats. “Unfortunately, many women, even in today’s modern world, haven’t either got to grips with their finances, or feel confident enough to take control of their finances,” says Haine.
“Being on top of your finances gives you financial strength, and knowledge is power.”
Why should you take control?
For Haine, women should first understand why taking control of their finances is so crucial – and there are a lot of reasons for this.
“Women generally live longer than men, they also tend to have significantly smaller pension and investment pots – that’s partly because of the gender pay gap, so they may have earned less money during their career. But also, they might have taken some time away from their career” – perhaps to take care of children.
“So the amount of money that’s going into their savings and investments for the future is less than men,” Haine explains. “The other problem is more couples are divorcing, so you can’t necessarily rely on your partner’s income or their pension. They may die – you’ve got to factor in that you might be left on your own.”
What’s the first thing you should do?
For Haine, the first step for any woman is to “have an idea of what their net worth is, how much they’re earning, but also how much they’ve got saved and invested”.
You don’t need to be a maths whizz to do this – Haine did it recently herself and says the process is actually quite simple. “I sat down with a basic Word document, and wrote down every single fixed expense I had going out,” she explains. “Then I calculated what I thought those other expenses would be that I might have – so commuting, food, perhaps what I want to spend on presents, all those kinds of things.
“Then I did a very simple budget, so I knew exactly what I had to spend over the course of the next few months.”
She suggests this is going to be more important than ever, with living costs soaring. “It’s crucial for women – make sure you’re on top of it, know what’s coming in, know what’s going out. Things are going to get expensive – we’ve got higher tax bills, we’ve got rising inflation, we’ve got energy bills spiralling upwards, and they’re going to get even more expensive as the year goes on. So this is the time to take control.”
Haine believes women often tend to have a good handle on day-to-day spending and short-term saving goals, but also encourages them to think about “long-term financial responsibilities – things like life insurance, pensions, investments, mortgage decisions – that’s something often the men think about, and that’s an old-fashioned concept”.
How else can you work towards financial independence?
For a woman in her 20s, Haine says: “She needs to think about putting away savings, perhaps putting a slightly extra percentage into her pension at work, or setting up different savings accounts so she has pots and can make sure she’s got money set aside in case things go wrong.”
And as you get older, Haine suggests: “You want to make sure you’ve looked at your savings for the long-term as well.”
If you are in a position to do so, Haine suggests doing some research around investing your money. “For someone’s who’s new to that concept, it can be quite scary,” she concedes. You might think you know nothing about investing or the markets, but Haine says: “Of course you do – you probably know more than you realise. Sometimes you just need someone to give you that confidence and say, ‘These are your options’.”
She recommends getting expert help if you are considering investing (Bestinvest offer free online coaching, while there are also other options you could consider). Investment isn’t necessarily just for women with higher incomes either, it can potentially be an option for everyone – and you can get advice tailored to your means and attitude towards risk (always make sure you are well informed about any risks involved).
“The beauty about saving and investing is over time, with the compounding effect, your investment portfolio and your savings will grow,” says Haine. “There’s something really magical about that, because it gives you security.
“And as a woman, you need to feel secure in your finances. You need to feel sure that no matter what happens, you can support yourself and your dependents – irrespective of anyone else in the picture.”