Finance – it IS different for women!

Sally Arkley, director of Women's Economy, outlines the challenges that face women in the business and financial world - and offers some advice on how to meet them. 

  

Finance – it IS different for women!

No, really! Academic and practitioner research shows again and again that the attitudes, behaviours, conditioning and expectations that lie behind how our financial world operates are different for women than for men - and that’s before we even start on any external bias that we might face! Research also shows that money in general is a far more emotionally powerful subject for women, and that this can profoundly affect our financial behaviour.

A few facts...

• In the UK women will earn an average of £250,000 less in their lifetimes than men
• Women have lower levels of personal savings than men
• Women consistently have lower credit scores than men
• Women are more likely to carry a credit card balance, pay late fees and make minimum payments on their debts than their male counterparts
• Women, in particular self-employed women, are less likely than men to have any pension plans at all.

Our attitudes and behaviour, formed in our personal relationship with money, will, of course, spill over into our business lives. Women consistently underestimate their business finance needs and are far more risk-averse than men. This is important because under-capitalisation is a key reason for business failure.

The finance world is slowly (very slowly) awakening to these differences and gender-based barriers, both internal and external. A couple of high street banks in particular are doing some very good work on this. But we have to remember that, in the world of finance, both business and personal, the default position is set to male - and men are still the ‘definers’ of both the market and the nature of its products.

As women, therefore, we have to educate ourselves on how best to operate in a financial environment that is not overly sensitive to our needs and preferences. 

Every Woman needs her financial toolbox

Remember that, above all, knowledge is the real power. Keep learning and you will protect yourself, grow and take control of your financial world.

Tool 1. Understand your own money attitudes and the way it can affect your behaviour - it takes time (and a bit of courage) to examine why we do what we do. For some help look at www.sheconomics.com 

Tool 2. Educate yourself. To be financially confident you have to have sufficient knowledge to operate in the financial world around you, so that you can control your financial life and not be controlled by others.

Please note, I said, sufficient knowledge - you don’t have to be an expert. 99.5% of us aren’t, but we do need enough knowledge to protect ourselves, our families and our businesses in an uncertain world. Financial jargon, for example, can feel very excluding and is sometimes used to be excluding - to confuse you, maybe even cheat you. You might make some of the biggest decisions of your life without understanding half of what people are saying or documents you are signing. There are good websites, often designed for women, with helpful lists of financial terminology. Have a look at www.savvywoman.co.uk

Use the professional knowledge available to your business but remember that accountants and book-keepers are there to help you. If they cannot explain about the financial side of your business in a way you can understand; find someone else. YOU are the customer. THEY are the supplier. Don’t let them make you feel bad for not understanding their product!

There are  so many good free resources available to educate yourself about both your personal and business finances. Try www.prowess.org.uk for business, www.boringmoney.co.uk and SavvyWoman  (address above) for both.

Tool 3. Know your worth

How others rate your creditworthiness is fundamental to the financial health of both you and your business. Most of us are entirely unaware of our credit, so check now. By law, credit agencies must let you have a report for £2, but you can get it for free at www.noddle.co.uk

Next job - a full financial health check. Do you know exactly where you (and your business) are today? Exactly how much you earn, how much you spend and your net worth? Have a look at www.savvywoman.uk or good old www.moneysavingexpert.com for tools to help you do this.

Tool 4. Future proofing

"My Zen teacher said: 'The only way to find true happiness is to live in the moment and not to worry out the future. Of course he died penniless.’ Carrie Bradshaw, Sex and the City."

Future-proofing starts now and, above anything, it starts with two mantras:

1) Kill the debt

2) Think ‘Pension’

We will return to both in future articles but a few points for now.

Nothing corrodes your spirit like debt. Prioritise this over savings (other than an emergency fund), particularly in these days of low interest-rates. Draw up a debt spread sheet which shows the actual cost of your debt, both each month and cumulatively. There are good examples on the Sheconomics and the Money Savings Expert websites and the Money Advice Service is full of practical and understandable advice.  

We generally live longer than men and we typically take a number of years out of our prime earning period to care for children or parents. Self-employed women are the least likely of women to be saving for a pension and we are having to work for longer before accessing our state pension.

I urge you to read and learn from ‘Ladies Losing Out; a free booklet in women and pensions, downloadable from www.boringmoney.co.uk

The Women’s Economy is offering free ‘MoneySmart’ workshops in association with Coventry and Warwickshire Reinvestment Trust, currently to women in North Warwickshire, although we will be coming to your area. For more information contact admin@womenseconomy.com