One of the most important truths in financial planning is that women have significantly greater challenges than men. You might have heard of the ‘gender pay gap’, but unfortunately there are other gaps that affect women too.
First, there is ‘the motherhood penalty’. This refers to years of missed earnings and pension contributions for new mums who take a career break in order to bring up their young family.
Later, the cost of childcare is a primary hindrance stopping mums from getting back into the workplace. According to the Money Advice Service, sending a child to nursery part-time costs an average of £138 per week for 25 hours, or for 50 hours a week it costs £263.
As a result, many mums return only to part-time work, if at all. The Office for National Statistics tells us that 75% of part-time workers in the UK are women.
The changes in the state pension have also made things more difficult for women, who used to be able to take their state pension at 60. The age when you receive your state pension was equalised for women and men in 2018, so that a generation of women who expected to be able to retire at 60 were suddenly told they would receive their pension at 65 – which has since risen to 66.
Then there is the gender pay gap, where women tend to have lower salaries than men, another reason why they are less able to save.
The combination of the above leads to the ‘gender pensions gap’, meaning that women have lower pensions than men.
However, the new challenge is the ‘gender credit score gap’
According to new research by the credit ratings company Credit Karma, women across the UK have an average credit score of 652, compared to 705 for men. This may not sound like a big difference, but it means they tend to be offered credit at higher interest rates, which means they pay much more for financial products such as personal loans, credit cards, and, most expensive of all, mortgages.
In fact, this means that over a lifetime, a woman could pay nearly £17,000 more for borrowings.
The reasons for this are partly based on our social traditions. Nearly a third of women have some or all of their financial agreements in their partner’s name, and they are also less likely than men to have credit cards and loans, those products which can boost your credit rating if you repay them on time.
Women are also more likely to make purchases on a ‘buy now, pay later’ basis. A quarter do, and since many of those schemes are not regulated, a good repayment record does not feature on nor improve your credit score.
Unfortunately, part of the reason for this is that, according to Credit Karma, women tend to have higher financial disengagement than men, with 41% of women not knowing their credit score, compared to 35% of men. You can find out your credit score easily here.
If you’re concerned about your credit score, you can boost it fairly easily by doing things such as putting utility bills in your name, checking for mistakes on your file, or checking if it’s linked to another person whose rating is low. Things like registering to vote can also boost your score!
Would you agree that, given all of the above factors, a little financial advice could go a long way? Please chat to us if you’d like to know more.
This article was prepared by AdvisorStream and is legally licensed for use by AdvisorStream.
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