Women will invest when they know it isn’t evil

Written by Rebecca Jones on 10th May 2019

We write a lot about women here at Good With Money – particularly about the fact that far fewer women invest than men, making us poorer despite needing more money for longer lives often marked by lower wages and baby-making career breaks. We also write a lot about ethical and sustainable investing – quite a lot about it, in-fact.

Until recently, though, we (by which I mean I) had missed somewhat of a vital connection between these two things. While lamenting women’s lack of investing oompf and reporting on studies that show women care far more about Good investing than men, I had failed to spot that one might – in-fact – be the cause of the other.

Saving more, with less

Women’s absence from the investing space has long been assumed to be a combination of factors that include lack of financial confidence, less money, our more cautious approach to life in general and a lack of female role models in a male dominated and often hostile industry.

Recently, however, studies have come out debunking much of the above. Tackling point one, Fidelity’s Financial Power of Women study showed that women were only marginally less confident about investing than men – with a lack of financial nouse cited by 79 per cent of women as a barrier to investing compared to 69 per cent of men.

Women save AS MUCH money as men, DESPITE the gender pay gap. It’s just in cash
On point two (less money) it remains true that women still earn less than men, with the gender pay gap still very much a thing. However, this does not stop women saving. In-fact, more women save than men, with the latest HMRC ISA stats showing that 10.8 million women have an ISA compared to 10.3 million men.

What is more, a recent study by Crowdstacker shows that women save AS MUCH money as men DESPITE the gender pay gap.

In a study of 2,000 UK adults the online investment platform found that 39 per cent of women have savings up to £5,000 compared to just 34 per cent of men – despite 66 per cent of female respondents earning around or less than the UK national average wage of £27,560 and having an average of £150 less disposable income at the end of the month.

This flies in the face of oft peddled stereotypes of women as reckless spenders, as uncovered in a recent study by Starling Bank that showed that 90 per cent of financial articles aimed at women focussed on spending less, while three quarters of those aimed at men focussed on earning more and investing.

The problem is, women save in cash, not markets, with the same HMRC ISA stats above showing that 18 per cent more women have cash ISAs than men (4.4 million vs. 3.6 million). Meanwhile, 30 per cent more men have stocks and shares ISAs (1.3 million compared to 950,000 for women).

Not a cautionary tale

Our higher cash savings rate is often cited as evidence of women’s more cautious nature, what with markets involving an element of risk  an’ all.

However, this assumes that women are either more ignorant than men about the affect of inflation, (which since 2009 has been consistently higher than the average interest rate on a cash account, meaning cash savers have been losing money in real terms) or we are more willing to accept loss – which is somewhat the opposite of caution.

Caution in in fact the very trait that makes the women that do invest better at it than men
Moreover, recent studies have shown that caution in in fact the very trait that makes the women that do invest better at it than men. According to the UK’s biggest online investment platform Hargreaves Lansdown, its average female client made over 1 per cent more than male users between 2014 and 2017.

This also chimes with a study by Warwick Business School, that found that of the 2,800 investors on Barclay’s investment platform, women investing in the main UK market made 1.8 per cent more than men doing the same over three years.

A question of ethics

So, considering the above, what is the real answer to this conundrum? With all of our natural advantages and the obvious benefits of investing over cash, why don’t more women invest? The answer, I believe, lies in the many studies that show that more women than men are interested in ethical and sustainable investment.

According to a 2017 study by Morgan Stanley, female investors showed more interest in responsible investment than men, at 84 per cent versus 67 per cent. This is corroborated by a smaller study by Moxie Futures, which showed that 83 per cent of female investors care about where their money is invested, while 69 per cent felt a sense of urgency to invest responsibly.

Moreover, when it comes to fund managers in the sustainable investment space – women are far better represented than in the industry as a whole

Think ‘stock exchange’ and every one of us pictures screaming men in pinstripes doing their best to rob Joe Bloggs and crash the global economy

Thus women, on average, seem to care more about people and the planet than men do. There are likely many reasons for this that have nothing to do with biology and everything to do with society – a leading factor perhaps being the immense pressure put on men to be more aggressive than women in every walk of life, but especially in making money (as highlighted by the Starling Study).

And, crucially, there is almost nothing seen as being more aggressive, more heartless, more harmful to people and the planet than the world of finance. Whether it be Wall Street or Threadneedle Street, think stock exchanges and market indices and every single one of us pictures screaming men in pinstripes and braces (possibly looking like Michael Douglas and/or Leo) doing their best to rob Joe Bloggs and crash the global economy.

Time to take out the trash

In short, women don’t invest because society tells us markets and investment is evil, and women are less ok with that. Therefore, as posited in a recent opinion piece by Friends of the Earth for the Guardian, women need to be shown that this does not have to be the case: that investment can, and often does, benefit people and the planet – as well as our pockets.

This is our job – and we’ll keep on trucking. Meanwhile the industry needs to offer more Good investment products, and – in some areas – clean up its act and do more to help savers and investors across the board.

When we educate and empower people of all genders to make financial decisions that are aligned with who they are, then we’ll get more women to invest

Lord only knows who will still be investing in tobacco, fossil fuels, arms and HSBC in ten years – but it shouldn’t be people that don’t want to but actually are through pension funds that do nothing to educate and help savers align their money with their principles, for example.

When we get that right – when we educate and empower people of all genders to make financial decisions that are aligned with who they are and what they want to see in the world, then we’ll get more women to invest. And not before.

For your guide on how to invest for good, see the Good Guide to Impact Investing

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