HOW was your Mother’s Day yesterday? It's a day when families celebrate mums across the generations, from first-time mum right up to grandmother.
Today I’d like to look at the first group. Are you at the younger end of the mum spectrum – in your 20s or early 30s?
Well, now that you’ve celebrated Mother’s Day, I’m glad to say that on the financial front there’s also cause for celebration, because in recent years, more and more women have been paying attention to the need to save.
In fact, the proportion of women saving adequately has risen steadily over the past few years, and as a result the retirement savings gender gap – between women’s average pensions and men’s – is just starting to narrow.
However, what progress we’ve seen has been a long time coming, and it’s coming painfully slowly, according to the experts at Scottish Widows (SW).
As a woman, you still face many challenges to achieve financial security, in both the short and the long term. Here are just a few.
Let’s start with the short term, and the issues for young women in this 22-29 age group. SW interviewed over 5,000 savers across various age groups and found that for over a quarter of younger women (27 per cent), the most common cause of money problems was an unexpected bill. Young women revealed that any bill for £270 upwards would plunge most into the red.
But even if that bill never comes, it’s the fear of it that is the problem, because it forms a psychological barrier to saving. Four in 10 women in their 20s with a pension say they hesitate to save more into it, because they need to keep cash nearby in case of emergencies. So much so that SW has suggested (to government) to bring in more flexible pensions that offer limited, penalty-free access to cash to cover these very situations.
They estimate that opening up access in this way would get another 1m women in their 20s saving more for their retirement, and would create 357,000 totally new women pension savers.
But let’s get back to Mother’s Day. As a young mother, your input into your household goes far beyond the financial. We often tend to undervalue work in the home – it’s not ‘real’ work, because it doesn’t get paid. However, SW reveal that on top of any day jobs, mums spend almost 23 hours a week on childcare and chores such as school runs and housework - they really are the lynchpin of family life.
Let’s face it, he’s usually laid on the sofa with a beer watching the football.
But what if your income were to disappear due to redundancy, ill-health or god forbid, even worse? What might your children miss out on then? And your husband? Who would pay for the beer?
A third of mums admitted that their household would be placed at financial risk if they suddenly lost their income, and a quarter said they could only pay the mortgage for three months maximum, many raiding their savings to do so.
Now comes the big question. What have you done about it, mum? SW has the answer: ‘not much’.
Three out of five young mums in the UK still have no life cover, which means their families would be in a precarious situation if the worst were to happen.
Even if you ‘only’ have to give up work due to illness, SW say just 13 per cent of mums have a critical illness policy, leaving many more families at risk of financial hardship if mum were to become seriously ill.
Apart from getting life insurance or critical illness cover, SW also look at savings, and point out that if you build up £1,000 in your Isa or other savings account, it nearly halves your risk of falling into problem debt.
Is it possible you are underestimating the importance of your input to your household, both in financial and child-caring terms? Are your pension, insurance, and bank savings worth a little planning?
In this office our ‘motto for mums’ is: ‘Life’s better with a plan’. We’re worth talking to. Because even financial advisers have mothers.
:: Michael Kennedy and Shaun Doherty are independent financial advisers and pensions specialists, and can be contacted on 028 71886005. Further information on Facebook at Kennedy Independent Financial Advice Ltd or at www.mkennedyfinancial.com
