A footbridge over a stream in a forest

As rising inflation diminishes the real-terms value of cash savings, the UK’s cost of living crisis is set to be more detrimental for women than men. This is due to a gender investment gap that, according to the Independent, sees men twice as likely to invest as women.

Quoting figures from MoneyFacts, the report goes on to suggest that while the average Cash ISA rate has returned just 0.51% in the last year, Stocks and Shares ISAs returned 6.92%. And yet, almost a third of women prefer cash accounts, compared with 23% of men.

With inflation currently at 6.2% and set to rise above 7% in the coming months, an overreliance on cash savings could affect all savers, but with a disproportionate effect on women.

Numerous factors are combining to maintain rising inflation

Back in October 2021, a Barclaycard survey found that almost 9 in 10 (88%) of consumers were worried about rising inflation. The Consumer Price Index (CPI) at that time stood at 4.2%.

Since then, inflation has continued to rise. Recent Office for National Statistics (ONS) figures confirm that the CPI rose by 6.2% in the 12 months to February 2022. Inflation is now expected to peak at around 7.4% and not return to the Bank of England’s (BoE) 2% target until 2024.

With supply chain issues and the continuing war in Ukraine affecting global economies – and household shopping and fuel bills rising at home – making your money work for you is more important than ever.

Men and women are equally likely to hold some cash savings

Even during periods of high inflation, there is a case to be made for holding some of your wealth in easily accessible cash.

The importance of an emergency fund

An emergency fund is designed to help you cope with a financial shock should the worst happen.

Having between three and six months of household expenditure put aside in case an accident or illness suddenly cuts your income is a great idea. You’ll want to hold this in cash so you can access it the moment you need it.

The dangers of keeping too much aside for a rainy day

When inflation is high, you’ll need to be particularly wary of holding too much. With savings rates low – despite the recent BoE rise to the base rate – your cash holdings are effectively losing value in real terms when measured against inflation.

If you haven’t checked in on your emergency fund for a while, take a look now to make sure it is at the right level for you and your household.

Where you have more than you need, you might consider turning to investment.

Only a third of women see themselves as investors

Figures published by MarketWatch find that only 33% of women see themselves as investors, compared to 42% of men. Women that do invest are more likely to be cautious, which could mean not making the most of available investment opportunities.

Managing your risk profile

The level of risk you are willing to take is individual to you. It is based on your general attitudes to risk, as well as more tangible factors like your overall financial position, the length of your investment, and what your end goal is.

We can help you to combine these factors to decide on a level of risk that is right for you. Remember too that your attitude to risk isn’t necessarily a static thing.

Think, for example, about the risk you’d be willing to take when an investment will be in place for 10 years or more, with the money intended to fund your retirement. Would your risk appetite be more or less than for a five-year investment to pay your child’s school fees?

The importance of staying calm

Once you’ve decided on your investment goal, term, and level of risk, you’ll need to remember a few other key lessons too.

The value of investments can fall as well as rise but the general trend of the markets is upward. Short-term volatility can strike at any time – as we’ve seen recently with the outbreak of the coronavirus pandemic and Russia’s invasion of Ukraine – but it’s crucial that you:

  • Stay calm
  • Avoid emotional, knee-jerk reactions
  • Focus on your long-term goal.

Remember too that we have decades of combined experience in the markets and are always on hand to help.

Get in touch

At HA&W, we can help to build a resilient financial plan aligned to your goals, whatever the economic climate. We’ll then conduct regular reviews to ensure your investments are on track, giving you confidence, a sense of control, and peace of mind about your financial future.

If you are worried about the effect of inflation on your finances or you’d like to consider investing – even for the first time – contact us now to find out how our Chartered financial planners could help you.

Please note

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.