The benefits of a written comprehensive financial plan are generally universal for all, but women face unique challenges that make having a financial plan more critical and working with a certified financial planner worthwhile
10 good reasons why Women need a financial plan and financial planning
- Women generally live longer than men and that means more years of retirement.
- Women have a higher incidence of becoming seriously ill or disabled and more often than men will find themselves in need of some type of long term care
- The gap is slowly closing, but women tend to earn less than men, on average, and save less as a result.
- Women are more likely to take time away from work for caregiving; both for children and aging parents. 54% of family caregivers are women. Lower or interrupted salaries means lower retirement savings and less in the way of pension benefits
- Women also are more likely to help others before they help themselves. That includes providing financial support to children, grandchildren or aging parents.
- Women tend to put off investing until later in life losing the positive effects of early compounding
- Women tend to be overly conservative with their investments
- Women have the intellectual capabilities to make excellent financial decisions but often lack self-confidence or feel they are not prepared to make financial decisions
- Women often leave the management of household finances and investments to their spouse
- On average, 73% of women surveyed in an extensive financial planning study in 2018, indicated that they “worry a lot about money) . Women in mid-life tend to worry more (79%)
Women are increasingly becoming financial decison makers
Whether single, married, divorced or widowed, research conducted by TD Bank recently predicted that 90% of women will be solely responsible for their own finances and for their own financial well-being for as many as 16 years. That’s a result of women living on average, 4-5 years longer than men and also a tendency to marrying older men. The average age of widowhood, according to the U.S. Census Bureau, is 59. My own mother became a widow at age 58 and was responsible for her own financial well-being for 26 years after his death.
Women are closing the gap financially
In 2011 it was estimated that there was a wage gap of 18-20% within most occupational categories for women versus men. The world is changing and that wage gap has been slowly decreasing. The percentage of women senior executives, business owners and entrepreneurs has risen significantly in recent years. Most colleges and universities are graduating more women than men each year and almost 40% of women are out-earning their husbands. Canadian women are managing close to 50% of financial assets currently which is predicted to rise to 60% by 2026. A decade ago, women controlled about a third of all wealth in Canada so the need for financial planning for women is clear.
Self Confidence lacking
A 2007 study on gender differences by Tahira Hira of Iowa State University and Cäzilia Loibl of Ohio State University reported that women are less likely to be socialized in financial matters, and more likely than men to find investment decisions stressful, difficult and time consuming. The same study also found that it often takes a life event, like getting married, to prompt women to save and invest, whereas men were more likely to start investing gradually. Despite the strides women are making to close the gap financially this gender difference in attitudes and emotion around money and finance still exists for women. A more recent study found women were less likely to describe themselves as financially knowledgeable-only 31% believe they were. By comparison, 43% of men believed they fit that description.
Women think differently about money
Canadians are facing some of the more challenging economic times in decades. There is increasingly, a need to juggle many conflicting priorities (Debt, Budgeting, Home Ownership, Retirement Planning). Seven out of ten Canadians say they worry about their financial situation but women worry more (73% versus 63%) Whereas for men the goal has typically been more about accumulating wealth; the goal for women is oftentimes more about achieving financial peace of mind and security and thinking of money in terms of life choices instead. Women worry more about not being a financial burden to their family. Money is not a means in itself; it is a means to an end. That’s the ultimate goal of any good financial plan. Women think differently about money and what’s important to them. A cookie cutter approach in terms of financial advice does not work.
It’s key that women make proactive financial planning a priority
All of the above should be a wakeup call and an opportunity to seek out education and for more women to find the time to make proactive financial planning a priority. Based on a Leger poll of 1,000 Canadian women in 2018, nearly 38% of women said they knew “very little” about finance and investments. More than 56% did not have a written financial plan including 60% of those aged 45-54 and feel they don’t know to achieve their financial goals.
More savings often equates to more confidence in women; the feeling of being financially savvy is much desired. Regardless of age or income, a woman can be empowered through financial confidence and action. When women can start saving and investing at a younger age they will often be less conservative and become more empowered to ask questions and build their financial confidence. Delaying the start of investing until later, also means losing the positive impact of early compounding. When saving and investing starts earlier, it increases the likelihood that sufficient retirement dollars will be available later. But women also need to protect their personal and business assets and to protect their most valuable asset; their ability to earn an income. Without life and disability insurance, wealth is vulnerable to taxes, lawsuits, accidents, and other financial risks that are part of everyday life.
Get with the (financial) plan
Making savings, investing and insuring a priority is central to any good comprehensive financial plan and will help meet many of the challenges outlined here. If you don’t have a written financial plan, make it a priority. Start from the beginning. Gather your detailed information together and collaborate with a certified financial planner to develop a comprehensive, holistic and written personal financial plan. It’s a powerful tool to helping you identify, prioritize and meet your short term and long term financial goals and to become more knowledgeable and empowered about your finances. Work with a Certified Financial Planner to monitor and adjust your plan going forward. As a Certified Financial Planner and Accountant, I would be happy to assist. Reach out and connect anytime.
