October 2, 2020
COVID-19 has brought huge financial implications to many, both on an economic and personal scale. Unfortunately, it has also brought into focus the financial challenges faced by many women.
The London School of Economics recently highlighted that women are more likely to lose their jobs in the recession  while the IMF also warned that the pandemic had jeopardised any progress that women have made over the last three decades in closing the economic gender gap .
For many, working later, longer, or harder, or even just buying less, may seem like the only answers to this issue, but there are other ways that women can build a healthier savings pot and close the economic gap.
Build a safety net: It’s often recommended that individuals have between three and six months’ worth of their regular expenses saved in a ‘rainy day’ fund as protection for unforeseen emergencies. While it’s not possible for everyone to save this much, trying to save a little can build up to a bigger pot over time.
Save sooner: Young women should think about their long-term financial future from an early age. Whatever goals you have will usually need to be saved for and so getting into the savings habit as early as possible will help you to benefit from compound interest.
Save more: While auto-enrolment has meant that the majority of employees are saving into a pension, it may not necessarily be enough for a comfortable retirement, particularly if you take into consideration career breaks. Even contributing just one per cent extra of your salary into a workplace pension from early on could close the gender pension gap .
Avoid too much cash: One key reason for the expanding gender savings gap is that women tend to hold cash savings rather than investing. Although it’s essential to hold some cash for
an emergency, when deposit interest rates are consistently below the rate of inflation, you may find you lose some of the spending power of your money by holding savings in cash.
Consider investing: One-in-five women currently hold investments versus one-in-three men . At a time of exceptionally low interest rates, it’s important to understand how inflation can nibble away at your savings, reducing purchasing power. Over the long-term, stock markets have shown historical returns above inflation – the added risk has the potential for added reward, and longer- term investments are more likely to weather the ups and downs of the stock markets.
You can lower the level of risk by spreading money across different types of investment, known as a ‘portfolio’.
A diversified portfolio helps reduce the risk of your overall investments underperforming or losing money. Although, it is important to remember that all investments are inherently risky.
The price or value of investments, and the income derived from them, can go down as well as up and an investor may get back less than the amount invested. Rathbone Financial Planning is a part of Rathbones. Rathbones is a trading name of Rathbone Investment Management Limited, which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.
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