The future of finance is female

H: Jane Constantinis, Host
W: William Nelson, Future Foundation
J: Jill Stevens, National Savings and Investments

H: Hello and welcome to the Consumer Advice Show brought to you in association with National, I’m Jane Constantinis. Now, do you remember when you used to go and visit your granny and she’d fish under the bed and bring out a shoe box full of cash – those were her savings to give you a bit of pocket money to buy some sweets or whatever. Well, how things have changed. A couple of generations on people are more likely to be saving online than they are under the bed. Now, the Future Foundation has been commissioned to carry out some research into the past, present and future saving trends of our nation, and I’m joined in the studio today by William Nelson from the Future Foundation and also Jill Stevens whose from National Savings and Investments. Thank you very much for coming in to talk to me about this really fascinating piece of research. First of all Jill, why did you feel inclined to commission it now?

J: Well for the past year we’ve been celebrating the 50th anniversary of Premium Bonds and we thought it’s a unique opportunity to delve into the past and look at how people saved 50 years ago and how that’s changed now, and to understand how it’s going to change in the future

H: Very important for you as an organisation to understand what’s going to be happening out there in the market and what’s happening socially, because William were you surprised by the findings? What were the key things that came out?

W: Well yes, lots of fascinating findings from the research, it’s a very interesting brief obviously from NS&I to look back 50 years and look forward 50 years, at Britain’s savings behaviour. If we go back to the immediate post-war period, 1957 when Premium Bonds were launched, this was such a different environment, people had far far less income, very much fewer households were able to save, only about one third of households back then were able to save regularly, and today it’s a much higher proportion, about 40% of households are now saving regularly, and that’s going to keep rising I think in the future, so that’s one thing that was very different, people just had a lot, lot less money, but of course –

H: But percentage-wise were they saving, you know was it a higher priority then than it is now? Do you think?

W: I think it was very important for a lot of households to try and just make their money just last the week. So many households are just on that weekly budgeting horizon where many households had to use pawn brokers and borrow small amounts of money just to get through the weekend, and get the – usually the man in the suit – back out of the pawn brokers for Monday morning, so you had so many households sort of really saving on this weekly basis, and now of course we can look to much longer horizons when you can start saving for next year, or even our retirement. People are able to look much further, so I think people’s horizons have changed a lot as well. And the other thing that’s changed in a really big way is the roles of men and women in the households, and the kinds of responsibilities that they have for saving have changed a lot as well

H: So would it be fair to say that women are getting an increasingly important role in the decision-making?

W: Yes absolutely, yes I think that was one of the big things that really came out of the research, if you look back to 1957, women were responsible for some aspects of managing household finances but what it tended to be was they were responsible for going and doing the weekly shopping, and ensuring that a really limited amount of money lasted the week, whereas men would make the big decisions on the whole, and what we’ve seen over the last 50 years is a big shift, and women – as their earnings have increased – a lot, you know from going from just being a top-up to household income to being –

H: Pin money as it has been called

W: Pin money, yes. To going to be – in many cases – you know one in six households women are actually the main income earners in their households, but in so many more households earnings are really very close to being equal, so the women have a very much more important role in household finances generally, and they’re not just making the small, everyday decisions about spending, they’re having much more of a say in who chooses the mortgage, who chooses the pensions, who makes those really serious financial decisions

H: Was this something that you were surprised by Jill when you got the research?

J: I’d say yes I was surprised and I think it’s something that’s set to continue as well, that women are having an increasing role in making their household financial decisions, and I think more and more women are looking to be the key breadwinner in the family, so it’s something which we need to keep an eye on

H: Do women make different decisions to men? Are women more cautious or – how does it work?

W: I think on the whole there is a different psychology of savings among women, they do tend to prioritise less risky things, less enjoyable things, they’re slightly more responsible savers than men are I think

J: And women are constantly aspiring to save more than men, so this on the whole is going to hopefully increase the savings level in Britain

H: Yes, but so it’s a trend that’s already started and set to continue you think, but at the moment it’s the men who are still calling the shots is it?

W: Well actually for about two thirds of couples, those big financial decisions like the mortgage and pensions, they’re actually shared jointly between both partners, but where one or other does have the final say it does tend to be the man at the moment, but that’s only true of about one in five couples, the man will have the final say. About one in ten couples the woman has the final say on these big financial decisions, and I think what’s interesting is that if you look back over the last 20 years those numbers have been shifting gradually, and I think if we look forward sometime in the 2020s we’ll see actually where one partner does make, have the final say in a couple, it’s more likely to be the woman than the man, so in that sense I think we can say that women will be holding the purse strings of the household in the next generation or so

H: And what are the implications Jill, I mean this research is really interesting on a sort of social level, but obviously you want to use it as well, what are the implications for savings and the kind of products you might offer in the future?

J: Well increasingly banks and building societies are looking to target women, if you look back to the past you’ll have found that banks and building societies were targeting men only, and there are a lack of products, and a lack of targeting to women. Women didn’t have as high a financial education as they do now, so women are more and more financially aware and we need to be, we need to be zoning in on that

H: Really really big implications in the way you talk to women, the tone of voice that you use, all those sorts of things. Really interesting times. Is it all down to women’s earning power, is it simply, is this shift in power simply because women are earning more?

W: I think that’s a big part of it, you know we look back a generation, women’s average hourly earnings were so much less than men’s, so just a little bit more than half of what men earned, and now that’s risen to more like 4/5s now on average but I think what’s really interesting if we look at women in their 20s, before children come around, average earnings among 20-something women are now about 96% of men’s, it’s almost identical to men’s earnings among 20-somthings, and I think if those trends continue it won’t be long, perhaps just another 10 years with more and more women coming out of university than men, it’s now about – every year about 5 female graduates for every 4 male graduates leave university in the UK, so with those trends happening we’re going to see within about 10 years women’s earnings in their 20s are actually likely to be greater than those of men and also I think what we’ll see is that in the growing number of households, women will actually be the chief income earner and we predict about 1 in 4 households by 2030 will actually have a female chief income earner

H: But of course there’s another huge change in the dynamic of most families, not all, and that’s when children come along – what have you seen, or what do you predict will happen in that situation? And I’ve experienced exactly this myself from almost earning the same as my husband, having a child, earning nothing suddenly and it really does change the dynamic of a family

W: I think that’s exactly right and I think we’re likely to see that situation changing more slowly, so I think overall it is probably a long way off that we’ll see women as a whole earning more than men as a whole because most couples still make that decision when children come around, it’s the women who tends to reduce her commitment to paid work

H: Certainly for a certain time anyway, if not forever

W: For a time. I think what we’ll see in the future is that will cost women less and less in the future because there’ll be more and more pressure for better legislation, better support in terms of childcare, better maternity benefits, so we’ll see the cost of having children for a woman will become a lot less, and this generation of women who are ambitious, well-educated and certainly very financially literate, aren’t going to settle for what happened to a woman who had children in the past, they’re going to expect their careers to continue after that and –

H: Are they though, are they or do you think there is, we’re seeing a sort of sea change, you’ve done the research, you know more about it than I do, but I’m wondering what the next generation of women are going to expect from their post – you know kind of further education lives

W: I think it’s a very individual thing and you know women make their own choices at that time, and many women do actually want to – you know it’s actually a very positive choice to stay at home to look after children, but for many other women the careers are very important to them, and I think it’s going to be a lot easier for women in future to continue to pursue those careers, and also to – also perhaps keep in charge of those big financial decisions, whether a woman’s earning or not, this generation who are very financially literate and quite able to cope with all those big decisions, are going to expect to continue to do that, they’re not going to take a back seat just because they’re not working, so I think the role of women in making financial decisions is likely just to grow and grow

H: So you as an organisation are going to have to be tracking the social changes, how the family unit is developing and altering and adapting your proposition accordingly?

J: I mean that’s right, yes women are taking a bigger role, but there’s other things which we also need to be considering, for example the use of technology. More and more people are using online banking which is something that we’re already up to speed with

H: I wanted to ask you actually a slightly wider question – are we still a nation of savers or have we not got into this business of expecting to acquire whatever it is we want, immediately, because my sense from what I see in the media is that people now want instant gratification. What do you think? From the research what do you think?

W: Well I think if we look at the long term trends in the savings ratio, the amount of people’s income that they’re saving has remained very stable actually over the last 30 years, people are borrowing a lot more, but actually people are earning a lot more as well, so often I think we can get a misleading picture of what’s happening with savings from the fact that people are borrowing so much more. They’re also saving a lot as well, and vastly more than in 1957, just because so many households really had to survive from day to day and really didn’t have any spare money to put by. Now we see many more households able to save on a regular basis and think to a longer-term future

H: What do you think about that?

J: It depends because people have a higher disposable income, they’re not saving up for the short term goals, for example buying a pair of trainers, because by the time you save for those trainers they’re probably out of date, and technology as well, the movement of technology develops so fast and by the time they have saved then that technology has gone by and it’s now out of date, so we’re saving for the longer term goals

H: For bigger, maybe bigger things, saving for properties and so on. How do we compare to – of a – it may not have been within your remit of the research, but what’s your feeling about how we compare to other nations in terms of our saving habits?

W: I think people in the UK aren’t quite as enthusiastic savers as some other European countries. You do find that in countries such as Germany there’s a real aversion to credit and rates of savings that the other savings ratios therefore much higher, or historically, so it does actually swing around, as the economies of different countries go through good times and bad times you’ll see that people in those countries are saving more and saving less, so

H: Anything in the report that was interesting on a social level to do with the male / female thing, how couples live their lives quite differently now?

W: Yes I think women’s lives have changed in so many ways actually in the last 50 years that there’s so many facets of women’s increasing independence, and individualism to consider so you might look at the fact that women have got much more senior positions in the workplace, they’re not just working more, they’re actually – the proportion of managers for women is rising incredibly rapidly in the last 20 years from less than one in ten to one in three managers, are now a woman, and that’s happened in the last 50 years, so I think the gender revolution, we often think of as happening in the 1960s and ‘70s but in fact it’s really something that is happening now in terms of couples roles in the household. Something else that’s very interesting is just that day-to-day management of money, not necessarily just the big decisions but paying the bills was something that was very much the preserve of the male partner 50 years ago, and even for older generations today, it’s something the male partner tends to take responsibility for. Fascinatingly in younger households up to the age of about 35 we’re seeing – it’s become on the whole the woman’s responsibility to pay those bills, now whether you consider that to be a form of power or just a responsibility I’m not sure, but I think that what it does signal is that women are that much more confident –

H: And what about things like, you said that in the olden days women didn’t even know what their husbands earned, how much they earned, what about that, what about the kind of secrecy aspect of earnings?

W: I think that’s another very interesting aspect of change that we’ve seen over the last 50 years, we often used to see in 1950s that men, while the wife would know what her husband earned perhaps when he started his career, she’d be kept in the dark about subsequent pay rises, which would just mean more beer money for the male partner, and it was about one in four according to some research done in the 1950s, one in four women had no idea what their husband was actually earning, and today we’ve repeated that research for NS&I and found that it’s a much smaller proportion actually, couples are much more clued up about what each other are earning and what they’re bringing in. I think going forward into the future this could perhaps, we could be seeing a return to the past in some ways because the new technologies of saving which are based around mobile devices, it’s going to be a lot more easy to put aside money you know perhaps using your mobile phone, saving can be a lot more private –

H: Without your partner knowing?

W: Yes, put aside that secret stash of money, be it for a little treat for yourself or just I think a lot of people feel a sense of security just having –

H: Mine’s called the shoe fund! No I think you’re absolutely right, and in my situation we have joint accounts and we have our own accounts and I have no idea what’s in my husband’s joint account but I know what’s in my shoe account obviously. Not very much. Do you think Jill this is good news, good news for society but is it interesting and good news for you in your organisation?

J: The financial secrecy?

H: No the whole, all that you’ve discovered in this research?

J: There’s definitely some good news there in that people are saving more and like you said by 2050 – what date is it?

W: 2050, yes

J: 2050 we’re looking to have increased our savings almost threefold and you know that’s really good news in that people can afford what they want to spend their money on, they don’t need to be saving up to pay the bills for the shorter term goals

H: Not sure about this secrecy business though, I don’t know if that’s necessarily a good development. Anyway it’s absolutely fascinating, thank you for coming in to share it with us

J: Thank you

H: And if you’d like to find out more about this research then go to the website which is NS&I.com, it’s on the screen now. Thank you very much for joining us and we’ll see you again soon, bye bye