Women are financially disadvantaged throughout their lives. From paying the “pink tax” – more for similar clothing and toiletries compared to men – to the gender pay gap, pensions and inheritance gaps, it’s much harder for women to attain and maintain personal wealth.
Add in a lack of financial education specifically addressing women’s life stages and its earning peaks and troughs, and it’s a particularly hard circle to square.
The problem has wider negative economic, social and cultural impacts, too. Women live longer and suffer from more chronic disease and pain, so they need a bigger pension pot to ensure their continued financial independence. Women who get divorced or are single parents are more likely to live in poverty and be dependent on the State for support.
Europe is working to address these significant financial barriers.
The European Union acknowledges that gender equality remains a challenge across member states, with women still earning 12.7 per cent less than men and facing greater employment gaps. This particularly applies to mothers.
While more women are graduating from university, many continue to encounter barriers such as unpaid labour, gender discrimination and gender-based violence. The EU’s 2024 Gender Equality Index highlights slow and uneven progress and it stresses that gender inequality costs the EU an estimated €370 billion a year.
The EU’s Roadmap on Gender Equality addresses crucial issues such as work/life balance, equal employment opportunities, economic empowerment, quality education, access to healthcare and freedom from gender-based violence.
It also acknowledges that gender inequality extends beyond the workplace, with global crises disproportionately affecting women’s mental and physical health.
Know your numbers
Women are likely to have, and to make, less money than men. This deeply embedded structural inequality won’t be solved overnight, so what steps do you need to take to make the most of your income at every stage of life and reduce your risk of future financial insecurity?
As with most things, knowledge is power, so know your numbers and examine the gaps and potential pitfalls first.
Women’s income levels peak much earlier than men’s – in their 30s – according to the Central Statistics Office. Men continue to increase their earnings over time while women’s earnings stagnate.
In 2022, the highest median annual earnings for women was in the 30-39 year age bracket (€42,350). The age group with the highest median annual earnings for men was 40-49 at €52,362. This was 23.8 per cent greater than the earnings for women in that age group (€42,297).
The pensions gap between men and women is 36 per cent, Irish Life says. Women have to work eight years longer than men to have the same pension, yet their working lives are often shortened by caring responsibilities and they are in any case generally paid less.
Where else can you find money to make up the shortfall?
If you think a potential inheritance might help with your financial future, you need to think again.
Recent research, Shaping Women’s Fortunes: Inheritance and Gender Disparities by Louisa Roos and Naomi Crowther at Trinity College Dublin, found that inheritance should not be considered an effective tool to reduce gender inequality as it makes no permanent difference to gender wealth gaps.
The economists compared women’s and men’s wealth and income pre and post inheritance using data from Sweden. They found inheritance does not create a balance between women and men’s wealth in the longer term. Structural barriers to wealth accumulation had accrued over the woman’s life cycle and, when women received an inheritance, they were more likely to invest the money conservatively, so they saw little capital growth.
Moreover, women appeared to work less and care more for others after receiving an inheritance, so wage income reduced.
Develop a freedom strategy
Deirdre McCarthy, founder of Flit female finance, says many elements are needed to ensure a good financial outcome as women start out with less.
As a single parent for 20 years, who also navigated her finances in the “squeezed middle”, even though she was earning well, she realised that the key was understanding her income as well as the entitlements, benefits, grants and tax refunds available. That inspired her to start her business and to help women come up with a plan for every stage of their life.
Women tend to focus on immediate needs such as budgeting for groceries, saving for a school trip or paying the monthly bills, “but we need to prioritise ourselves and not feel guilty about creating a longer-term strategy for our own financial future. Don’t be the bottom of the list”.
Her top tips are to be proactive and strategic about saving and about spending.
Although it might seem a long way off, it’s important to actively monitor and be involved in your pension.
“Choose a higher risk level for your pension when you’re younger. Regularly check in on your pension and interact with your adviser. Ensure your pensions investments are aligned with your values and ethics,” she says.
“Be prepared to complain especially around transparency of fees and costs. Your annual pension report should clearly state all charges, commissions, fees, admin fees and fund related charges.
“Invest in assets, property and your education, and look to maximise the help you can get from others to do it. Make the most of government schemes (insulate your house, help with elderly parents, educational grants) that can make it happen.
“Know your tax credits: renters tax credit is now €1,000 per person or €2,000 for a couple, yet many people don’t claim it.”
“Try to take a broad perspective on spending: you don’t have to own something or buy it new to get use of it. Do you need a holiday home or are you better off renting one a few times a year? Same with a car. Buying an older car is better value and it’s 65 per cent of the price.”
One handy way to get a quick handle on your investments or debts is called the rule of 72, McCarthy says. This applies to cases of compound interest.
“Whatever net interest rate you’re paying on a debt or gaining on an investment, divide it into 72. If you’re making 4 per cent a year on an investment after charges then your investment would double in 18 years. At 6 per cent it will double in 12 years,” she says.
“It’s the same with paying a debt of 6 per cent versus 8 per cent. If you’ve never made a repayment, the debt will also double in that time.”
It’s a good way to see how very small changes in percentages over time make a big difference.
“Women take a back seat on earnings as soon as kids arrive and they never recover psychologically or financially. The message is that work at home is worth less, so therefore they undervalue their work and their needs,” McCarthy says.
She urges women to value themselves and plan for the future. As with your choice of life partner, your choice of employer is key. Ensure your employers’ benefits are aligned to a woman’s needs over time and be proactive about salary negotiations and proper pay reviews.
“There’s also the upcoming EU pay transparency directive: call out any pay discrepancies and negotiate a raise. Ask, ‘How do I get to the higher earnings level?’ The employer in theory is obliged to tell you.”
Margaret E Ward is chief executive of Clear Eye, a leadership consultancy. margaret@cleareye.ie
