Fighting for female financial health

Your health is your wealth but financial health also matters. Unfortunately, on that front women are faring more poorly than men.

“When we talk about female financial health, we refer to the overall well-being and stability of women’s financial situations,” says Alessia Paccagnini, associate professor at University College Dublin’s School of Business.

“It covers different aspects such as income, savings, investments, debt management, and retirement planning. Achieving financial health empowers women by providing them with economic independence and control over their financial decisions. This is important for promoting gender equality.”

It’s also important for long-term security. “Financial health ensures that women have the means to support themselves and their families in the long run. This includes having sufficient savings, investments, and retirement funds,” she says.

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“Financial health also enables women to make life choices without being constrained by economic factors. This includes choices related to education, career, family planning, and retirement.”

She points to a recent survey from Bank of Ireland which found women have lower confidence in managing money and are less satisfied with their financial situations than men.

“The findings indicate that 28 per cent of women feel knowledgeable about financial matters, in contrast to 36 per cent of men. Moreover, only 15 per cent of women feel confident choosing investments without an adviser, compared to 27 per cent of men,” says Paccagnini.

So why do we have this gender gap in Ireland, one which reflects a similar trend in other countries?

“Historically there has been a gender investment gap, with women less likely to invest in the stock market or other financial instruments. This could be due to various reasons, including lower risk tolerance, lack of financial education, or cultural factors,” says Paccagnini.

“Bridging this gap is essential for women to benefit from the potential wealth-building opportunities offered by investments. Moreover, women often face challenges in building a substantial private pension fund. Factors such as career interruptions for caregiving responsibilities, the gender pay gap, and longer life expectancy can impact the amount of money women are able to contribute to their pensions. It’s crucial to address these issues to ensure that women have adequate resources for a comfortable retirement.”

The first step is to promote financial literacy generally.

A nationwide Financial Literacy Score Index, commissioned by Bank of Ireland and conducted by Red C, found that Ireland has an average financial literacy score of 54 per cent, with just over half of test questions answered correctly. But the Index revealed a striking difference across gender, with women scoring almost 10 per cent lower than men.

To remedy this requires a “whole of society approach”, starting with conversations at home and lessons at school, according to Dawn Bailey, head of financial wellbeing, Bank of Ireland. Participation in subjects which cover financial decision-making, such as business studies or economics, is skewed male, she adds.

Better financial literacy could help overcome more nebulous issues such as poor stereotypes in popular culture. Bailey points to a Swedish study which looked at financial literacy for boys and girls aged 11 and 15. Both started at the same level. By age 15 a gap had emerged as, the study suggests, girls were exposed to stereotypes about girls being profligate spenders and making poor financial decisions. “Their literacy decreased compared to boys,” says Bailey.

Yet research also suggests that women make the lion’s share of household budgetary decisions. That might be part of the problem — keeping their focus on the short rather than the longer term.

“Women are making a lot of those everyday decisions. My intuition is that there is a limit to the capacity a person has when they are already making sure there’s enough food in, that the lunch boxes are done and the electricity bill is paid,” says Bailey.

Three-quarters of respondents to Bank of Ireland research agree that “the rising cost of living means I have to prioritise my everyday spending over my longer-term saving”. But women are much more likely to say so, at 79 per cent, than men, at 68 per cent.

At the same time, when it comes to understanding how pensions work, 56 per cent of men say they do, compared with just 37 per cent of women.

In relation to understanding the tax benefits of saving for pensions, 47 per cent of men say they do, compared with just 30 per cent of women.

Men are also much more likely to have sought pension advice from a financial adviser, at 27 per cent, compared to just 18 per cent of women.

“As females, we are used to putting everybody else before ourselves when really we should be looking after ourselves,” says Siobhan McNally, head of business development wealth at AIB.

That includes recognising and protecting the value of their contribution if they become critically ill, or their partner passes away, and protecting it with critical illness protection and life cover. It also means being aware of the impact that career choices can have on pension planning.

“Maternity leave, parental leave, career breaks — we don’t necessarily think about the impact these will have in terms of gaps in our pension contributions. That’s why it’s really important to revisit these, to see if there’s going to be enough to live the life you want to live in retirement,” says McNally.

A financial adviser can, in a jargon-free manner, help women assess their situation and tailor a plan to suit their budget.

“I wouldn’t underestimate the relief you feel when you talk to a financial planning adviser,” says McNally. “The peace of mind of feeling that you have a plan, that you are on a journey, is enormous.”