Pre-pandemic, women were increasingly embracing their financial power and this progress must continue. When we started our Women and Money campaign back in 2018, our aim was to get more women engaged with investing and preparing financially for the future. While circumstances have changed in the pandemic, encouraging more women to invest just small amounts will be important to ensure that this doesn’t result in a permanent step back. Here we look at three steps you can take now to improve your financial fitness longer term.
1. Re-build your contingency savings
Sit down and look at your finances. Consider the impact the pandemic has had and how to get back to where you were before. Building up a safety net of savings will be a key first step towards financial security once you are back on your feet. Working out the amount you can afford to put into your savings each month will help you to slowly build this back up. Even very small amounts can make a big difference over time.
2. Consider investing
Once you have established a savings pot for emergencies, start to think more about your longer-term finances. Having enough saved away will make all the difference to how you can spend your retirement. For example, can you divert the money you have left each month into your pension or a stocks and shares ISA?
Making use of tax-efficient products such as an ISA can help make sure your money is working harder for you, and by drip-feeding your contributions you can even-out ups and downs in the markets (when prices are low your money will buy you more than when prices are high - known as pound-cost averaging) to protect against volatility. However, you should only put in money that you don’t need in the short-term and always aim to hold your investments for at least five years.
3. Don’t forget your pension
If you saw a reduction in income over the pandemic and/or reduced your contributions into your pension, it’s important that you consider how you can boost your pot once you’re more financially secure. The more you can invest now, the more your future self will thank you. Making the most of government measures such as the Carry Forward rules will allow you to make up for previous years where you didn’t contribute as much. Alternatively, if you’re a couple and one of you has taken a career break or a reduction in income, your partner can contribute into your pension to keep you on track. Remember, even if you’re not working you can still contribute £2,880 into a pension each year and benefit from government top-up of £720, taking the total to £3,600.
Increasing your contributions is the most sure-fire way to building up your pension pot and it doesn’t have to be by much. Just by contributing an extra 1% of your salary into your pension per month, women can close the gender pension gap by retirement.
Want to see how much of an impact a 1% increase in savings can make for you? Use our power of small amounts tool to see how a small change can make a big difference.
The value of investments and the income from them, can go down as well as up, so you may get back less than you invest. Investors should note that the views expressed may no longer be current and may have already been acted upon. Tax treatment depends on individual circumstances and all tax rules may change in the future. Withdrawals from a pension product will not be possible until you reach age 55. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.