Motherhood can bring enormous personal rewards, but it can also have a significant impact on a woman’s long-term financial position.
Career breaks, reduced working hours, changes in career direction and increased childcare costs can all affect earnings, pension contributions and the ability to invest for the future.
So, can women recover financially from the so-called motherhood penalty?
According to Rebecca Robertson, independent financial adviser, wealth coach and director of Evolution Financial Planning, the answer is yes – but it requires planning, open conversations and taking action early.
What is the motherhood penalty?
The motherhood penalty describes the financial impact women can experience after having children.
Women may take time away from work, move into part-time employment or change careers to accommodate childcare. While these decisions may make sense for the family at the time, they can have consequences for earnings, savings and pensions over the longer term.
The financial impact can also come on top of existing inequalities.
Rebecca highlights the gender pay gap, noting that the median pay gap for full-time employees is currently in favour of men. For women, earning less can mean having less money available to save and invest before they even have children.
There is also an investment gap. Rebecca points to research suggesting young men invest at roughly twice the rate of young women, further widening the difference in wealth accumulation.
Once motherhood is added into the picture, career breaks and reduced working hours can make that gap even harder to close.
Why having children can affect women’s finances
Having children can change the way a household manages its money.
One partner may reduce their hours or stop working altogether, while the other continues working full-time and potentially progresses further in their career.
This can create a significant difference in individual earnings and pension contributions.
Rebecca says one of the most important things couples can do is discuss their finances before having children – not simply after they are married or buying their first home.
Questions about who will work, who will take time away from work, how childcare will be paid for and how pensions will be maintained should all form part of the conversation.
The answers may change over time, but understanding the possible scenarios can help couples make better financial decisions.
Why pension contributions matter during a career break
One of the biggest financial risks of taking time away from work is falling behind with pension contributions.
Rebecca advises women not to assume that they cannot afford to continue paying into a pension simply because their income has fallen.
Even a relatively small contribution can make a difference over the long term.
“If it’s £50 a month,” Rebecca suggests, couples could agree an amount to top up the pension of the partner who is not working.
For someone who is working but earning significantly less, increasing pension contributions where possible can also help reduce the gap.
The important point is to start somewhere rather than waiting until there is more money available.
Couples need to have honest conversations about money
Money can become a source of tension in relationships, particularly when one partner earns significantly more than the other.
Questions about who pays the mortgage, who pays for the children’s expenses and how household income is divided can become increasingly important when one person has reduced their working hours.
Rebecca believes couples should view household finances as a joint exercise where possible.
One approach is to treat income as a shared household resource, particularly when one partner is unable to contribute as much financially because they are caring for the children.
Another option is to calculate household costs proportionately according to each person’s income.
For example, if one partner earns £1,000 a month and the other earns £3,000, their contributions towards joint costs could reflect that difference rather than simply being split 50/50.
The key is having the conversation and agreeing what works for the household.
Financial independence should not be forgotten
Rebecca says women should continue thinking about their own financial future, even when family finances are shared.
That can mean maintaining pension contributions, building savings and understanding what assets and investments exist within the household.
Knowing where money is held and how the family’s finances are structured can also provide greater security if circumstances unexpectedly change.
Illness, accidents, separation or other major life events can all affect a household’s financial position.
Having a clear understanding of the finances means both partners are better placed to deal with those situations.
What can women do before having children?
Planning before motherhood can help reduce the financial impact of a career break.
Women who have built successful careers may already have access to workplace pensions, bonuses, shares, or other investments. Making the most of those opportunities before taking time away from work can help create a financial buffer.
The earlier money is invested, the longer it has to potentially benefit from investment growth and compound returns.
Rebecca’s advice is not to wait until everything is perfect before taking action.
Starting with an affordable amount and increasing contributions when circumstances allow can be more realistic than setting an unrealistic target and giving up altogether.
Women in business face another financial challenge
For some women, starting a business becomes a way to create greater flexibility around family life.
However, running a business does not automatically mean financial security.
Rebecca says some women can spend years building a business while keeping their prices low, working limited hours or reinvesting heavily in the business without generating significant profits.
As children get older, there may eventually be an opportunity to increase working hours, grow the business, and improve income.
But building a commercially successful business is important if it is also expected to contribute towards long-term financial independence.
Rebecca also highlights wider inequalities in business funding. She points to research suggesting that women own around a third of businesses globally, while female-only-founded start-ups receive only a small proportion of venture capital funding.
This means the challenges facing women can extend beyond household finances and into entrepreneurship and access to investment.
It is never too late to improve your financial position
The motherhood penalty can appear daunting, particularly for women who have already taken several years away from work or reduced their earnings.
But delaying action can make the problem harder to solve.
The longer money remains outside a pension or investment, the less time it has to potentially grow. That means women who have experienced career breaks may need to make larger contributions later to catch up.
Rebecca’s advice is therefore to start with what is affordable and build from there.
That might mean contributing £50 a month to a pension, reviewing existing investments, increasing contributions when income rises or simply understanding where the household’s money is going.
Small steps can become significant over time.
Financial planning needs to reflect real life
There is no single financial plan that works for every family.
Motherhood, career breaks, childcare, changing incomes, and business ownership can all create different circumstances.
The important thing is to make financial decisions as a couple, understand the potential long-term consequences and avoid putting one person’s financial future permanently behind the others.
Rebecca says becoming a mother was one of the best things she ever did, but reaching her own financial goals required her to navigate significant barriers along the way.
The motherhood penalty may be a difficult financial reality, but it does not have to determine the rest of a woman’s financial life.
With early planning, open conversations and consistent action, women can work towards rebuilding their financial position and creating greater security for the future.
Rebecca Robertson in the Accelerating Your Wealth podcast.
