Millennial women’s capacity to be financially independent diminishing
Student debt has almost doubled in six years and women are taking longer to repay student debt due to lower earnings throughout their careers, warns the Chartered Insurance Institute.
The combination of growing debt, lower earnings and a lack of confidence when it comes to dealing with financial matters is putting millennial women at greater risk of an old age in poverty. Student debt has almost doubled between 2011 and 2017 and women who take out a student loan to attend university, are now less likely to repay their student debts within the 30-year timeframe due to lower earnings throughout their careers. Female teachers, social workers, and nurses/ midwives are expected to have between £29,000 and £49,000 of debt remaining after 30 years. In some sectors, it takes women 13 years longer than their male counterparts to repay student debt, leaving them less able to save for the future.
Growing levels of unsecured debt is exacerbating this problem for the younger generation and particularly young women. The average total debts of 15-24 year olds grew by more than 200% between 2006 and 2012 – more than ten times more quickly than the average debts of the wider population. Young women are becoming increasingly indebted with the majority of women aged 25-39 having credit cards, store cards, hire purchase agreements overdrafts non mortgage debt, bills and student debt). The same the same is true for men aged 35-39 only They also tend to have higher outstanding debt on their credit cards, with the average balance at £926 for women and just £790 for men. However, young men who have overdrafts tend to have a higher outstanding balance at £1,436 on average, compared to £941 for young women.
Young women start out with more debt and are also less able to repay it. Women continue to earn less than men in most fields and the gender pay gap is not expected to close until at least 2050. 3 in 5 professional women who take a career break to have children return to lower skilled or lower paid jobs. And women who work part time earn 30% less per hour than those working full time, further compounding their ability to repay debt.
Saving for a home, retirement or for a ‘rainy day’ in case things go wrong is vital to ensure financial security. Young women are less likely to save for the future than older women and circumstances mean they also save less than men. Overall, women are more likely to save than men but typically save lower amounts – women aged 25-34 are more likely to hold an ISA – 1.50 million compared with just 1.38 million men; but the average ISA market value for this group of women is £5,118, which is 83% of the average value for men (£6,180). When looking at retirement savings, men typically amass five times the pension pot of women by the age of 65 (£35,700 vs £179,091).
Preparing financially for ill-health in later life should also be a key consideration for young women now. Due to greater longevity, women need more help with daily living as they get older and are likely to spend longer in care than men. Consequently, the costs are significantly higher for women and yet they have considerably lower wealth to support themselves. Private expenditure on social care is likely to triple. Due to their greater longevity and younger age of marriage, older women are less likely to live in a couple than men, leaving them more in need of social care. The average cost for a woman entering a care home aged 65-74 is £132,000, nearly double the cost for men – for expected stays of 4 years for women, 2.5 years for men.
With all these challenges it is not surprising that young women are less confident than men about managing money. Only 37% of females aged 18-24 years say they are very confident managing their money compared with 48% of males. A large number (59%) of 18-34 years olds worry about not having enough money to retire. Over half (52%) of women in their late 20s say they do not understand enough to make decisions about retirement savings, compared to just 38% of men. Among young people in debt, only 37% have a repayment plan in place but among these 18–24 year olds it is young women who are more likely to worry about money than their male counterparts (57% versus 45%) and more likely to lose sleep over it (24% versus 18%).
Jane Portas, Insuring Women’s Futures Committee lead on Women’s Risks in Life, lead author of the report and PwC Partner, said: “Women continue to have a fundamental lack of financial resilience to the risks they face in life. Many of the issues leading to women’s exposure to risk are deep rooted in society and will only get worse for the next generation unless we act now. We need to find new ways of educating and engaging young women and put policies in place that support them throughout their life. As a society, we need to improve women’s risk protection, economic independence and financial resilience, improving the financial future for us all.”
Sian Fisher, CEO of the CII and Chair of the Insuring Women’s Futures Committee, comments on the research: “Insurance has always played a central role in safeguarding not just the nation’s homes, businesses, health and wealth, but the freedom to make positive life choices as a result of having that security in place. This research underlines the need for insurance, policy makers and consumer groups to work together to act now because if we don’t address this, we will not have the resources to sustain the current situation.”
‘The Big Conversation’ event is being held today on Tuesday 6 March 2018 to bring together the insurance and financial planning profession, policymakers and the third sector to discuss the unique risks women are exposed to throughout life and how the insurance and financial planning profession can collaborate with wider societal groups to address them. There will be interactive workshops on issues such as innovation in risk and protection and women at work, as well as panel debates and networking sessions. The aim of the event is to come up with new and innovative ideas to help shape the direction of the profession in order to address the disparity between women’s risks in life and their resilience to them. The Insuring Women’s Futures Market Task Force will be following up on the ideas generated on the day to implement them within insurance.
The “Securing the future of the next generation: The Moments that Matter in the lives of young British women” report can be downloaded at: http://www.insuringwomensfutures.co.uk