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Finance-boosting tips for young women

Emma-Lou Montgomery

Emma-Lou Montgomery - Fidelity International

Important information: 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.

Whether you are young or old, male or female, the pandemic, for most people, has been tough. New data from Fidelity International1 shows two stark and worrying trends that have emerged. And for those affected by both, the situation is potentially doubly precarious.

First up are women. While the pandemic has made saving and investing difficult for all women, single women have been hardest hit, with more than a quarter seeing their income fall, putting a real pressure on their ability to protect themselves financially.

But they are far from alone. The other group which has been worst affected is young adults - people aged between 18 and 34, 60% of whom have found themselves furloughed, or had their pay or hours reduced, or worse still, have been made redundant as a direct result of the pandemic. No surprise at all that just over half (51%) of people in this age group are very worried about their financial situation right now, compared to 46% of 35-54-year olds and 21% of over 55s.

And government figures back-up these worries, showing that almost half (48%) of under 25s were unemployed at the end of 2020.

What this all shows us is that a significant proportion of young people have struggled financially during the pandemic, and they are likely to continue to struggle for some time. They may have had to delay certain life events, work longer hours or turn to any savings they had to supplement their outgoings. Postponed plans can have knock-on effects and using up savings or working longer hours will undeniably cause worries in the long term for those affected, and these anxieties can filter into daily life and other concerns. 

When it comes to women in particular over a quarter (27%) of single women have seen their savings impacted, according to our data. In fact, this group has struggled the most when trying to save or invest over the past year compared to single men (22%), or men (23%) and women (21%) in relationships.

That is not a complete surprise. Just earlier this year, our research highlighted the disproportionate financial impact of the pandemic upon women, after a year in which women were 1.5 times more likely to have lost or quit their jobs, women were far more likely to be furloughed while many of those who stayed in work lost productivity, due to caring responsibilities and other pressures2.

What it does though, is leave us in a position right now, in which certain sectors of society are far more financially disadvantaged than others, and that has far-reaching problems for not only this generation, but potentially for generations to come. Because, while the average person in the UK has £66,818 held in pension savings, this falls to just over half that amount - just £34,079 - when it comes to single women. 

And, just like the pandemic itself, this is not a UK problem only, of course. Fidelity International’s research, which comes as part of an international study of women’s finances across six key markets including the UK, Hong Kong, China, Taiwan, Japan, and Germany also found that 31% of all women have seen the amount of money they’ve been able to save in the past 12 months decrease, in comparison to 26% of men. This trend is true across every market surveyed. 

So what can be done? Well, as ever, financial independence is in our hands. It is vital that we face facts, take the necessary steps and tackle the financial side-effects of the pandemic head-on. And, of course, you don’t have to be young and/or female to benefit from these six steps below.

1. Tackle any debts that are weighing you down
Borrowing money is not always a bad thing and can often be unavoidable in tricky financial situations. As long as you pay your bills on time, you’ll be building a positive credit history. However, there does come a point when you can have too much debt, which can cause a lot of stress. If you’re struggling with paying off an overdraft, try to develop a clear plan outlining how much money you can realistically afford to pay off each month. If you have credit card debts, focus on those with the highest interest rates first and keep track of your due dates so you don’t incur any late payment fees.

2. Be honest with yourself about your relationship with money
Looking at where your money goes is an obvious but all too-easy-to-ignore when it comes to dealing with bad spending habits. The simplest way to keep an eye on your budget is to make a note of your daily, weekly, and monthly spending. Like it, or not, you will soon spot trends and themes here. And don’t forget there are plenty of online tools and apps to make the job that little bit easier.

3. Take the time to really consider your next big life decision 
Given the financial challenges of last year, it’s no wonder so many of us have reconsidered major life plans. With the UK moving out of lockdown, now is a good time to move a few of those plans back onto your priority list so you can financially prepare for them. For example, house prices have increased so you may need additional funds for a deposit if you’re planning on moving home, travel plans may need to be streamlined, or you may want to build a bigger nest egg before starting a family.

4. Try to create a rainy-day fund
When money is tight, saving can seem daunting. While some experts recommend having enough savings to cover three to six months of your living expenses, this can be unrealistic for some. It is good practice to save wherever possible for a ‘rainy-day’, so you’re prepared for the unexpected. When it comes to saving, every little helps.

5. Don’t be afraid to get help
If you feel comfortable discussing financial concerns your finances with family, friends, or a partner, then do. Sometimes someone else’s thoughts/observations/experience can make all the difference when you are worrying about something. Additionally, there are free and impartial resources available, such as the Money Advice Service and Step change, providing free expert debt advice. Although it can be uncomfortable talking about money, it’s always best to start the conversation as soon as you can if you are struggling.

6. Look ahead to Future You
Finally, keep one eye on the road ahead. A regular monthly investment into your workplace pension is an easy and tax efficient way to help give you the financial freedom you want for the future - and each month, your employer contributes a minimum of 3% of your salary alongside you. And this step is even more crucial for women given both the gender pension gap and many women’s preference for ‘safer’ savings over arguably more effective long-term investing.

Next steps

Invest in your future self today by logging into PlanViewer and taking control of your workplace pension.

Sources:

1 Research conducted by Opinium research between 7 January and 12 January 2021 among 12,038 men and women in the UK, Germany, China, Taiwan, Hong Kong and Japan. UK-specific findings taken from the global study are based upon sample of 2,004 (990 men and 1014 women). The description of single respondents refers to those not living with a partner and does not include those who are divorced.

2 Institute for Fiscal Studies, How are mothers and fathers balancing work and family under lockdown?, 27 May 2020. https://www.ifs.org.uk/publications/14860

Important information: 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. The minimum age you can normally access your pension savings is currently 55, and is due to rise to 57 on 6 April 2028, unless you have a lower protected pension age. 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 a Fidelity adviser or an authorised financial adviser of your choice.