Despite their growing financial independence, 74% of women are more inclined to save their money, whilst only 12% attempt to invest. Investing your money has the potential to elevate your wealth and bring your financial goals into fruition, although this isn’t guaranteed. The difference between women and men’s inclination to invest translates to a huge gap with Boring Money reporting that men have £1.01 trillion invested compared to £450 billion for women.
So, why do women save rather than invest? Well, a combination of historical, psychological, and societal factors are at play. Traditional roles, risk aversion, confidence gaps, and lower financial literacy contribute to this trend. But now could be the time to reverse it. Because the good news is, when women do invest, they actually outperform men’s returns.
So let’s break down some of the main reasons women decide to save, rather than invest, their money.
Psychological factors
Psychological factors significantly influence why women often save rather than invest.
1. Risk aversion
It’s a common misconception that women are ‘frivolous’ and want to splash their money on clothes and handbags. In fact, according to HMRC figures, women hold more in Cash ISAs than men. This indicates that they tend to prioritise the safety of saving over investing which have the potential to grow or fall in value over time.
2. Confidence gap
Despite being equally competent to men, a confidence gap exists. According to HSBC, only 31% of women feel confident about investing compared to 44% of men. Women therefore doubt their own capabilities, which unsurprisingly sparks hesitation when it comes to making investment decisions.
3. Financial literacy
Across the world, women also report lower levels of financial literacy, leaving them feeling more cautious about engaging with the stock market.
Societal and cultural influences
Societal and cultural influences deeply impact women’s preference for saving over investing.
1. Gender norms
The truth is, societal norms continue to dictate traditional gender roles. Men are often positioned as the primary financial decision-makers and women as the caregivers and savers. These deep-rooted expectations shape financial behaviours too. PensionBee highlights how these gender norms create a wealth gap in their Carer’s Pension Gap. The research shows a 13% difference in pension pots for those who take time out of paid work to care for loved ones.
2. Media representation
Cast your mind back to the famous movie, The Wolf of Wall Street: a chaotic room full of men running around to beat the stock market. That’s just one example of how the media frequently depicts men as the more keen investors.
3. Peer influence
Social circles often perpetuate these norms. Think about it: do you and your girlfriends talk about money? These cultural narratives and taboos around money contribute to a lack of knowledge about investing. So this is your cue to start talking!
Economic factors
Economic barriers significantly impact women’s propensity to save rather than invest.
1. Income disparity
Women are automatically placed at a disadvantage due to the gender pay gap and underrepresentation in high-paying industries. Why? It’s simple: lower pay translates to less disposable income available for investing.
2. Job stability
Additionally, women are more likely to experience career interruptions. Taking time off for looking after children or caregiving can often lead to reduced lifetime earnings and savings. Women also often occupy roles with less job security, so it’s no wonder they’re often more cautious about investing.
3. Wealth accumulation
In turn, the cumulative effect of these economic disparities means that women accumulate less wealth over time. This could mean they tend to favour simple saving measures over potentially lucrative investment opportunities.
Practical barriers
1. Accessibility
Investment platforms can be tricky to navigate and many women find them challenging to access. Often built with men in mind, many platforms can deter women from exploring investment opportunities. Thankfully, we’re seeing the rise of female financial education platforms geared towards women’s needs, such as Female Invest, rainchq, Vestpod and Propelle.
2. Time constraints
Women are the unsung heroes. They’re often spinning multiple plates, including careers and family care. Let’s give you some context. In the UK alone, 76.3% of women aged 16-64 are in employment, compared to 52.7% of women back in 1971. On top of that, 81% of caregivers are female, leaving many with little time for financial planning and investment research.
3. Male-dominated industry
Additionally, the investment industry has traditionally been male-dominated. This makes it harder for women to find relatable role models and mentors, and it’s this lack of representation that alienates women when it comes to the stock market.
Understanding the investing barriers to break them down
When you look at these societal and cultural barriers, it’s no surprise many women opt for saving over investing. But when investing is a lucrative wealth generator, being aware of these barriers is the first step to take before breaking them down.
We can find solace in knowing that more women are showing an interest in the stock market and that they’re more than capable of making informed investment decisions that can boost their wealth. Here’s three things you can do today to improve your financial health:
seek financial education through platforms like Female Invest, rainchq, Vestpod and Propelle;
leverage supportive networks whether that’s your friends, family or colleagues; and
embrace tailored investment opportunities.
Interested in learning more? Listen to episode 21 of The Pension Confident Podcast. You can also watch the episode on YouTube or read the transcript.
Maria is a journalist and writer who previously worked as Global Editor at Female Invest. Her writing focuses on gender equality in finance. She’s also written for a variety of other publications including Harper’s Bazaar, The Telegraph, inews, Metro, Glamour and more.
Risk warning
As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.
