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Finance for women: 5 golden rules you should know

The more informed women become financially, the fairer a financial footing they’ll be on.

We delve into the 5 golden rules of finances for women below.

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The widening wage gap between men and women

According to a report by accountants Price Waterhouse Coopers, more than two in five companies saw their gender pay gap widen last year.

Figures suggest the gender pension gap is widening too — research by Now Pensions and the Pensions Policy Institute suggests that a woman in the UK will have to work an extra 18 years if she wants her pension pot to be the same as that of a man.  

Despite huge strides in gender equality, women still often take on the role of carer, and this negatively impacts their finances.

Women are much less likely to ask for a pay rise, and women who start their own businesses tend to raise significantly less in investment compared to their male counterparts. 

So how can women shift the balance to put themselves on a more equal financial footing with men?

Below we’ve listed our five golden rules of finance that every woman should know.  

1. Achieve financial independence 

Financial independence is about being in personal control of your finances — effectively managing any debts, investments, pensions, and budgeting effectively to achieve your future goals.  

Becoming financially literate can prevent you from being overwhelmed by finances.

Not only that, but the more financially literate you are, the better placed you will be to grow your wealth. 

Being in control of your finances also means knowing about all financial matters that could — or do — impact you.

It’s surprising how many women leave the management of the mortgage, insurance or pension to their partner without knowing the details of the products their partner or spouse has invested in.  

If you’re married or in a civil partnership, make sure you find out all you can about every financial product linked to your household.

And if you’re young and single, take this time to find out all you can about finance so you can be well prepared for whatever lies ahead.  

Whether you are single, married or divorced, it’s worth speaking to a financial adviser to make sure your finances are set up to support your future life goals. 

2. Reduce the pension gap  

Why is there a significant pension gap between women and men?

Women are typically paid less than men, and as a consequence, 3 million women do not qualify for their workplace auto-enrolment pension scheme because they don’t earn above the £10,000 threshold needed in order to qualify for it. 

Women are also more likely to have longer periods of time out of work, meaning they have less time to build up savings in their pension pot.

As a woman, how can you build up your pension pot?  

Firstly, your National Insurance contributions determine how much state pension you get. But if you must — or plan to — take time out of work, those contributions cease temporarily.

If you take time out of work to bring up a family, make sure you claim Child Benefit, as you’ll automatically qualify for National Insurance Credits.

These credits then help build up your ‘qualifying years’ — all of which count towards your state pension entitlement. 

If you don’t yet have a pension, a good, tax-efficient way of investing in your future is to contribute regularly to a workplace pension.

It’s also worth finding out about what other pension schemes are available. Remember, it’s never too late — or early! — to start your pension journey

If you’re going through a divorce, make sure to take advice on how your pension could be affected, or what pension sharing rights you could have.  

3. Debt consolidation 

With the cost-of-living crisis starting to hit and the threat of recession ahead, now is the time to get on top of any debts you may have.

Financial worries can have a real impact on everyone’s mental health, and this can spiral out of control too easily as poor mental health can make it harder to manage financial problems.  

If you do have debts, just getting to grips with them and putting a strategy in place is an important first step.

The worst thing you can do is bury your head in the sand.  

If you can, begin by paying down those with the highest interest rate and move on from there.

Alternatively, it may be a good idea to focus on paying off the smallest debt first and then working upwards.  

If you’ve run up money on a credit card, see if you can move this to a balance transfer card.

These cards offer a zero per cent interest rate for a set period of time — sometimes up to 34 months — meaning your repayments go towards paying off the balance only, and not towards interest.  

It's also worth going through your monthly outgoings to see if you can identify any savings elsewhere that could go towards paying off debts.

Could you cut back on your shopping bill, order fewer takeaways or manage without a gym subscription for a few months?

It’s surprising how quickly these small sums can add up.  

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4. Rethink your approach to savings 

Research suggests that women tend to hold more in cash than men. And with inflation on the rise, cash will likely fare less well than riskier options.

If you’re able to invest for the longer term, taking a bolder approach to investing could guarantee you better returns overall.  

There are also a growing number of financial products offering responsible investing — or ESG (environmental, social and corporate governance) investing — where funds are only invested in socially responsible companies that take their environmental responsibilities seriously.

So, not only can you benefit from potentially better returns, but you can put your money to good use by supporting the causes that really matter to you.

Remember though, that investments can go down as well as up, so don’t put away any money that you might need in the short to medium term.  

With the women’s state pension age rising fast, many may find they need to rely on savings to boost their income in their last few years of work, if they don’t want to work full time until age 68.

So, having investments in place outside of your pension is a sensible way forward. 

5. And finally… be bold! 

The gender pay gap demonstrates the extent to which women are still, on average, paid less than men.

Take a look at your earnings, think about your earning potential and consider whether you should be getting more.

This could mean asking for a pay rise, going for a promotion, or even moving jobs.  

If you’re taking time out of work to raise children, stay connected to your professional peers.

If you manage to find the time amid the child-rearing, see what you can do to keep your professional skills up to date.

Alternatively, ask yourself if there are new skills you could gain by doing a training course online.  

How can a financial adviser help?

Whatever your situation in life — single, a new mum, recently divorced, working full time or approaching retirement — there are a wealth of things you can do to improve your financial situation.

Speak to an expert to find out what more you could be doing to make your finances work for you. 

You might find our article on the world's richest women informative, too.

Get financial advice
We’ll find a professional perfectly matched to your needs. Getting started is easy, fast and free.

About the author
Kate has written for leading publications and blue chip companies over the last 20 years.