The female art of planning

BOOKSHOP shelves are overflowing with self-help guides, aimed almost exclusively at women. And sitting alongside the dating and diet manuals are copies of Savvy Investing for Women, Money Matters for Women: Getting it, Investing it and Enjoying it and A Man Is Not a Financial Plan: Investing for Wealth and Independence.

This might, at first, seem a little strange – after all, women invest in the same financial products as men and a stock doesn’t behave any differently regardless of whether it is owned by a man or a woman.

But while the solutions are naturally the same, women do tend to take a slightly different approach – they are typically known for being much more cautious and risk averse than their male counterparts.

While it is easy to make too many generalisations, women are also seen as less aggressive and less cavalier in their attitude to money, preferring steady and stable appreciation over the long-term to making a quick buck. For example, more than a third of women surveyed by TNS Finance expect financial providers to launch new products which are low-risk but have a reasonable yield.

This has also been borne out in scientific studies conducted of City traders and their hormone levels. It has been suggested that men are more successful at quick fire day trading while women are supposedly superior at asset management, which requires them to weigh up the evidence and come to a carefully considered decision.

But women also have slightly different needs when it comes to their finances compared to men. For example, between 2005 and 2008, it is estimated that 81 per cent of mothers with children under four were not working full-time, according to the latest British Social Attitudes survey, published earlier this year.

INTERRUPTED EARNINGS

“Women need to plan around it and for it. Taking time out can interrupt earnings, affect career progression and women need to accept that earnings may not grow at the rate they had hoped,” says Adrian Lowcock, senior investment adviser at BestInvest. This is not just true for new mothers; it is equally true for those taking a sabbatical, heading off on VSO, or planning to study full-time.

“Effectively you need to create a nest egg, whatever that might be for,” adds Lowcock. The first step is to maximise your ISA allowance, preferably with a mixture between cash and stocks – although the exact blend will depend on your attitude to risk.

It’s not just your earning power that will be affected either, so will your retirement planning. Remember that you need to make 30 years of National Insurance contributions to qualify for the full state pension. If you are taking time out of work to raise your children or choosing to work part-time for a number of years, then your pension contributions will fall.

On average, women live longer, so they will need a larger pension pot at the point of
retirement. Consequently, for those women who think they would like to take time out to
look after their kids, they need to put as much as possible into their pension pot before
they stop work.

The earlier you start paying money in, the longer it has to grow. Those who can afford to
keep on investing should also consider equity income. These stocks are looking attractive at the moment and you will also be paid a decent yield – appealing if you need an extra source of income.

Women might not need special self-help books to manage their finances but they do need to think about what they want and plan accordingly.