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Women and the financial frontier

Addressing the financial challenges facing women, with tips men can use too.

Women are centre stage in 2018. They’re speaking out across social media and demanding change – and there are signs they’re well positioned to get it.

The federal government has a gender‑balanced cabinet for the first time in history. Globally, female empowerment, workplace equality and the issues women face are the subjects of daily headlines. And in February, Maclean’s magazine printed two versions of its cover – offering the issue at $6.99 for women and $8.81 for men to draw attention to pay equity and how far we still have to go to achieve it.1

Financial empowerment is an important frontier for women. They have a lot going for them already. More and more Canadian women are taking their places in university classrooms and corporate boardrooms,2 suggesting strong earning potential. The wage gap in this country has narrowed3 as women’s median annual earnings have more than doubled over the past half century.4 Furthermore, women have a track record of outperformance in investing. One U.S. study found that women achieve a 0.93 per cent return advantage because they don’t trade in and out of investments as frequently as men do (and therefore don’t lose as much to commissions and fees).5 Another found that women have a 0.4 per cent performance edge annually, and boost their balances further by setting aside an average of 9.0 per cent (compared to men’s 8.6 per cent) of their paycheques in workplace retirement accounts.6 However, as the Maclean’s covers pointed out, a significant wage gap persists.

Recent data from Statistics Canada shows that women working full‑time in Canada earn, on average, $0.74 for every $1.00 their male counterparts make. The hourly wage rate, which takes into account that men often work longer hours than women, shows women earn $0.88 for every $1.00 men earn.7 So, women may set aside more of their paycheques, but if those paycheques are smaller the dollar amount they save won’t be as high. And while women may get slightly higher investment returns, if those higher returns apply to a smaller asset balance they’ll likely still end up with less. That’s a problem because women often need more savings than men.

Supporting time off work

Why do women need more savings? One of the biggest reasons is that women tend to experience more time away from work throughout their lives, whether they’re raising children, caring for relatives or enjoying a longer retirement thanks to greater longevity.

Mothers tend to take significantly more time off than fathers after the arrival of a baby, using an average of 31.7 weeks of employment insurance parental benefits compared to the 16.1 weeks used by fathers.8 And, among families with one or more children under age 16, 16.2 per cent have a mother who stays home, while just 2.0 per cent have a father who stays home.9 The loss of income during the period a woman spends at home is compounded by the opportunity costs. Women who are out of the workforce may miss out on raises and promotions, as well as educational and networking opportunities.

As a result, they may not advance as quickly or reach the highest (and best‑paid) levels in their careers. In addition, more women than men are among the 28 per cent of Canadians who are helping someone with a chronic health problem – and caregiving can turn into a full‑time job. For example, seven per cent of people caring for a parent spend 30 or more hours a week doing so.10Overall, women caring for ailing family members lost an estimated $221 million in wages every year from 2003 to 2008 because they had to miss work, reduce work hours or leave their jobs.11

Then there’s life expectancy. Women’s savings often have to stretch over more years in retirement. For example, women born between 2007 and 2009 can expect to live to 83, while men born in the same period have a life expectancy of 79.12 That average extra four years will clearly cost more and require additional savings.

Forging ahead

There are many approaches individual women can take to maximize their earning potential and strengthen their financial position – and they work for men too!13

1. Negotiate

Negotiate your salary when starting a new job. Employers often have an acceptable range in mind, and starting with a higher number provides a higher base to build on with future raises. Once you’re in a job, lay the groundwork for a salary increase by proactively asking managers for recommendations that will help you do your job better and position you for a raise or promotion.

2. Communicate

Clearly communicate accomplishments as they occur. They’ll help you make the case when the time comes to ask for that raise or promotion – and the case will be stronger if you can put numbers on it. So, if an initiative you spearheaded increased sales, attracted clients or boosted efficiency, find out by how much and share the information widely.

3. Research

Invest some time researching salaries for people in your area who share your title and responsibilities so you’re well informed about your market value. Ask around and do some online searches to find out the going rate for your skill set. At work, be forward‑looking and talk to your manager about how you’d like to contribute to the future success of your organization.

Recent studies show women tend to outperform men when it comes to investing.

4. Study

To make ongoing raises more likely, think about enhancing your qualifications with additional training and education. Extra credentials can make you more attractive to your current employer, and to other employers too if you decide to change organizations. To speed up your career progress, seek out mentors who can suggest more efficient and effective ways to reach your goals. The wisdom that comes from experience can be invaluable.

5. Prepare

Prepare financially for absences from work. Find out what your province and employer cover in terms of maternity and parental leave, absences related to caring for a critically ill family member, compassionate care leave and bereavement leave.14 If you’re concerned about coverage gaps, consider building extra savings in an emergency fund so you have money to support you through unanticipated periods away from work.

6. Protect

When it comes to financial planning, it’s important to protect the income you earn with appropriate insurance, such as disability and critical illness protection. Life insurance protection can help preserve your spouse’s and children’s financial security should there be a time when they can no longer rely on your income.

7. Invest

See if you can make your money work harder for you by investing early and often in a diversified portfolio that suits your risk tolerance and time horizon – a professional advisor can be invaluable in designing a long‑term investment strategy that is customized to your needs. You may also consider permanent life insurance for tax‑free investment growth – a great investment alternative, especially if you’ve already maximized your Registered Retirement Savings Plan and Tax Free Savings Account investments. If you are a parent, be aware that it’s important to balance planning for children’s needs and your own. Whether you’re saving for children’s post‑secondary education or helping adult children with big purchases, make sure your contributions don’t prevent you from pursuing your debt repayment strategy, retirement savings plan or other financial priorities.

8. Maximize

As you approach retirement, develop a plan to maximize retirement income and make it last. Part of that plan may include determining when to start receiving Canada Pension Plan benefits so you can take full advantage of your benefit, and ensure that you apply for the child‑rearing provision that discounts lower‑earning years you took off to raise children.15 Another critical element is to structure investments to minimize volatility and deliver a steady stream of income for as long as possible.

Speak with your advisor

By partnering with an advisor you trust, you can create the prudent and all‑encompassing financial plans you need to navigate life’s financial challenges and achieve high‑priority financial goals. Talk to your advisor about strategies that can position you as strongly as possible to protect your lifestyle, enhance your wealth and meet your unique objectives.

1 www.macleans.ca/society/why-macleans-is-asking-men-to-pay-26-more-for-our-latest-issue
2Martin Turcotte, Women and Education,” Women in Canada: A Gender-Based Statistical Report, Statistics Canada catalogue no. 89-503-X, last updated November 30, 2015, www.statcan.gc.ca/pub/89- 503-x/2010001/article/11542-eng.htm (accessed April 30, 2018); www.osler.com/osler/media/Osler/reports/corporate-governance/Gender-diversity-board-of-directors-executive-officers-Canada-2017.pdf 
3 www.cbc.ca/news/business/statistics-canada-gender-pay-gap-1.4014954
4 Statistics Canada, “The Surge of Women in the Workforce,” The Daily, March 3, 2017, Statistics Canada catalogue no. 11-630-x, www.statcan.gc.ca/pub/11-630-x/11-630-x2015009-eng.htm (accessed April 30, 2018).
5 faculty.haas.berkeley.edu/odean/papers/gender/boyswillbeboys.pdf
6 www.fidelity.com/about-fidelity/individual-investing/better-investor-men-or-women
7 www.theglobeandmail.com/news/national/gender-pay-gap-a-persistent-issue-in-canada/article34210790
8 worklifecanada.ca/cms/resources/files/731/CURRENT_STATS_ON_PATERNITY_LEAVE_AND_FATHERS.pdf
9 Sharanjit Uppal, “Employment Patterns of Families with Children,” Insights on Canadian Society, Statistics Canada catalogue no. 75-006-x, last updated November 27, 2015, www.statcan.gc.ca/pub/75- 006-x/2015001/article/14202-eng.htm (accessed April 30, 2018). 
10 Martin Turcotte, “Family Caregiving: What Are the Consequences?,” Insights on Canadian Society, Statistics Canada catalogue no. 75-006-x, last updated November 27, 2015, www.statcan.gc.ca/pub/75- 006-x/2013001/article/11858-eng.htm (accessed April 30, 2018). 
11 vanierinstitute.ca/infographic-women-caregiving-work-canada
12Statistics Canada, “Archived: Life expectancy at birth, by sex, by province,” CANSIM table 102-0512, catalogue no. 84-537-XIE, last updated May 31, 2012, www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/health26-eng.htm (accessed April 30, 2018). 
13 www.forbes.com/sites/elanagross/2016/06/27/8-managers-share-the-best-way-to-ask-for-a-raise-and-get-it/#3b3d24ce74ff
14 www.canada.ca/en/employment-social-development/programs/employment-standards/federal-standards/leave.html
15 www.canada.ca/en/services/benefits/publicpensions/cpp.html
16 www.benefitscanada.com/news/women-face-gender-gap-in-retirement-planning-investing-63458
17 www.fidelity.com/about-fidelity/individual-investing/better-investor-men-or-women