Why don’t more women invest?

The gender wealth gap is alive and kicking – something highlighted at the start of the year by headlines warning women that, on average, they’ll have to work for a whopping 19 additional years if they want to retire with the same pension as their male counterparts.

Shocking statistics aside, the picture isn’t altogether straightforward. Women do save and looking back over the past five years of data, I’m struck by the fact women actually have more ISAs than men. But women tend to favour a cash ISA over a Stocks and shares ISA.

Higher interest rates are unlikely to persist

Right now, with interest rates higher than they have been in 18 years, sticking to cash is arguably less of an issue than it has been, but historically investing has outperformed over the long term.

Look back over the past decade, a period when rates were exceptionally low, and the numbers are pretty stark. According to the Bank of England, £10,000 invested in a cash ISA would have been worth £11,223 at the end of December 2023, while data from FE Analytics shows that the average global equity fund in a Stocks and shares ISA would have turned that £10,000 into £24,184.

These figures highlight how the choice to stick to cash contributes to that wealth, and with savings rates expected to fall, it's something that needs to be considered.

Hard to keep track

Keeping track of interest rates is something that can languish on our to do lists, and whilst the popularity of cash ISAs amongst women means impending rate cuts are a particular concern for women’s financial health, knowledge is power and there seems to be a surprising lack of knowledge among both sexes.

AJ Bell research* found that 34% of women didn’t have any idea of the interest being paid on the product where the majority of their savings were kept, and while slightly more men were actively engaged with their finances, 26% admitted they weren’t sure either.

Even more surprising was that of those people who did know the rate of return their savings were netting, 42% of men and 46% of women said they hadn’t moved their main savings pot over the past two years to take advantage of higher interest rates.

Engaging with our finances can feel overwhelming and worry about making a mistake can stop us from taking any action, which can leave us all worse off.

Do women have a different attitude to wealth?

Why don’t more women invest? The reasons are many and varied – and unsurprisingly not so different to those given by men.

When it comes to ISAs of any variety, a lack of knowledge is still a huge barrier for both sexes. More than a quarter of women and almost the same percentage of men say they either don’t know enough about the product, they’ve not heard of an ISA before, or they’ve just not thought about it when it comes to their finances.

Being able to have instant access to savings pots is also a major consideration and for many people, a traditional savings account is a familiar friend. Since the introduction of the personal savings allowance, many people have had no need of a ‘wrapper’ to protect their savings interest from the taxman.

But higher interest rates mean that more than 2.7 million people are expected to pay interest on their savings this year, according to data obtained by AJ Bell from a recent FOI request made to HMRC. That’s a million more than last year and for many of those, it will be an unexpected and unwelcome surprise.

People are becoming more engaged

There could be a silver lining to that story as people consider the options available. While cash ISAs have traditionally been the most popular form of ISA with women, the cost-of-living crisis has got more and more women talking about money and engaging with their finances in a way they haven’t before.

The hashtag #recessionproof has generated over 85 million views on TikTok, while Facebook and Instagram are full of budgeting ‘finfluencers’. Talking about money, ways to save money and ways to make more money has become commonplace at the school gates, breaking a taboo that has persisted for generations. And once those conversations become more commonplace, some of the mystique should start to disappear.

Lots of column inches have been dedicated to the perception that women are more risk averse than men. What seems more accurate is that women tend to think about their finances in a slightly different way, needing to ringfence certain pots for things like helping their children get on the property ladder.

For women who do take the step into investing and plump for a Stocks and shares ISA, the reasoning behind that decision is the same as for men: it's about generating steady positive returns that beat cash savings returns.

Ringfencing certain pots like an emergency fund is smart, but given the right circumstance and the right time horizon, risk isn’t bad - it’s just another consideration on the path to financial wellbeing.

*Based on a nationally representative sample of 2,000 UK adults, with surveys carried out online between 26 January and 30 January 2024 by Opinium.

Source: AJ Bell. Based on a nationally representative sample of 2,000 UK adults, with surveys carried out online between 26 January and 30 January 2024 by Opinium