Financial wellbeing or lack thereof has a big impact on all aspects of a woman’s life, including the quality of her life, social relationships, and the freedom to pursue education, fulfilling employment and hobbies.
Women are affected by several factors, such as the gender pay and wealth gap, a lack of financial literacy and family commitments that hinder their ability to achieve financial wellbeing compared to their male counterparts. Brown women in particular still face cultural and social expectations that exacerbate these factors. Poor financial wellbeing can result in not only a lack of future planning, but also result in debt, stress, anxiety and wider mental health issues.
According to the Office for National Statistics, among fulltime employees the gender pay gap in April 2022 was 8.3%. This figure is exacerbated when ethnicity is taken into consideration because men continue to earn more than women in most ethnic groups. This is due to the work disruptions women face (either temporarily or permanently) such as the need to care for children, spouses, and parents. The difference in pay accumulates after each work disruption compared to men or women who do not take time off from the workforce, becoming harder to close the gap. Depending on a woman’s life goals, work interruptions can and should be planned for.
Traditional gender roles in brown cultures where women are the ‘carers’ of the family and men are the financial ‘providers’ is another factor to consider. Traditional gender roles result in a woman’s lack of financial literacy because there is an absence of exposure to understanding how family members manage the household’s finances. Additionally, women-controlled finances (if available) are more likely to be spent on household expenses, such as food and child welfare, and therefore they are more short-term focused. Brown women may also be discouraged from entering the workforce early and a woman that enters the workforce much later in life will earn less over her lifetime. As a result, a woman depends on the ‘provider’ of the family for financial security which can result in an unhealthy “financial power” residing with men. Brown women should be encouraged to enter the workforce early to learn how to manage their finances and build their savings to achieve financial independence. The taboo around talking about money needs to be removed by engaging in conversations with family, friends, and colleagues to gain more exposure to how individuals are managing their money and provoke self-awareness of one’s own finances.
The gender wealth gap or gender investment gap, i.e., the difference between women’s and men’s total sum of all financial sources, including salary earnings, investments, pension savings and additional assets such as property, is another factor affecting women’s financial wellbeing. The salary women earn is often no longer enough on its own nor is keeping money in a savings account because inflation may impact its value over time. According to a survey published in October 2021, only 29% of female participants in the UK have traded or invested in stocks and shares online compared to 47% of men. There are several factors for this, including a lack of knowledge on investing, an aversion to risk and currently financial products tend to be tailored towards men. Brown women also have less disposable income to invest but if able to set aside a small amount of capital to invest, they could take the initial step into trading and how it works.
Women who have been exposed to managing finances and investing whilst growing up will understand the importance of prioritising building wealth. However, in a traditional household, it is often the case that fathers will teach their sons to invest while mothers teach their daughters to save money, simply because they were never taught to invest from their own mothers. Navigating the investment landscape is not an easy task and many factors mean brown women lack the confidence to explore and try. However, the influx of information and education available indicates that women in brown cultures are becoming more open about their finances with others and are more aware of the importance of investing. The financial market is also changing and investing is becoming more mainstream, including the availability of more online learning resources empowering women with the tools to build their wealth. Women should be encouraged to learn and start investing early to build their confidence and knowledge – to essentially learn by doing. This could be done by trading on online platforms or by approaching financial advisors with whom they can build a relationship with and women can be assured that their goals are being heard. A higher degree of financial literacy, coupled with increased confidence will improve a woman’s risk tolerance to investing. Brown women can now work towards achieving financial independence and security by changing the aspects in their control, such as budgeting, gaining more financial knowledge, investing, planning for work disruptions, talking about money with others and becoming role models for younger women.
About the author
Yasmin is an Associate in the Financial Services Regulatory team at CMS. She advises financial services firms, market participants and investors on a range of complex UK and EU regulatory issues, with a particular focus on FinTech. She works with banks, FinTech firms, investment managers and advisers, crypto firms, insurance intermediaries, market makers, payment institutions, pension fund clients, private equity firms and private investment groups. Yasmin has first-hand client experience and has worked within investment banking, corporate banking, private banking and fiduciary management teams in both the UK and US financial markets.
