The “Motherhood Penalty”
The financial wellbeing of women who choose to have children is constantly under threat – but this doesn’t have to be the case.
New research shows that punishing childcare costs are creating a ‘motherhood penalty’ that contributes to an ever-widening gender pensions gap which disadvantages women in retirement.
Many working mothers end up going part-time when they would prefer to continue working, simply because the childcare sums do not add up.
The research, published by pension firm The People’s Pension, shows almost four in ten part-timers would choose to work more if childcare was cheaper.
The knock-on effect of shorter hours is not only lower pay, but a reduced ability to save for retirement at the same level as men.
The gender pensions gap is more than double the gender pay gap with the average female pensioner £7,000 a year poorer than her male equivalent. For high earning professional women, this difference can be very significant indeed.
We know that having children is always going to be expensive, but it seems unfair that women are jeopardising their future financial and lifestyle security too.
So what can we do to help?
A comprehensive cashflow model can show the lifelong financial effects of having children and can help women to determine what share of the overall household income they need to have, in order to invest for their own financial independence.
We know from experience that too many marriages fail and too many women are left without a robust financial safety net, because they gave up/suspended/were manoeuvred out of, their career when they had children.
We can help women make sensible financial and career decisions to give them better control of their future life by showing them various “what if” scenarios.
For example: recently we spoke to a couple about the effects of having a third child and how this would affect their future finances. We modelled not only the cost of the child and its future education etc, but also the woman returning to work after 2 years on 50% of her current income. We showed them the long term effects of this decision as compared to a scenario where she returned to work immediately, paid for child care and retained her full pension benefits.
We don’t yet know what they will decide to do, but at least they know how and when any decision will affect their future lives. There is no doubt that proper planning pays off!
If this issue is of interest to you, please do not hesitate to call us for a friendly, non-committal chat.