“Women & Wealth Management” is not a new concept by any stretch of the imagination, but many female investors, even those who have successful careers are not engaged in the financial planning process.
As an Investment Advisor, I’ve heard all kinds of reasons: everything from a lack of interest or understanding to frankly just not getting around to it on the legendary To-Do list. Reading further today means that you want to make a change and take charge of the financial decisions that affect your financial health.
So let’s get started.
“Financial challenges that are unique to women” isn’t something that we’re just making up as women. For biological and social reasons, women really do face unique financial challenges. Consider the following:
Stat: Women live longer on average
Impact: Women will need to fund longer retirements. Living longer also means needing to protect money from inflation and saving for higher health care cost.
Stat: Women are more likely to become widowed (Average seven to 10 years)
Impact: Being single means higher living expenses and managing your family’s wealth
Stat: Women tend to leave the work force for periods of time, earn less and have lower pensions
Impact: Women will have to rely more on self funding and government programs may be more important. Referring back to the first stat, we have to fund a longer life with less money.
Stat: Women tend to fall into the “Sandwich” generation more often than men
Impact: Greater need for a financial plan to address the financial cost of caring for your parents, planning for your children’s financial future, and simultaneously ensuring your own financial success.
Acknowledging these stats and making your finances a priority today through education and planning is the best defense you can give yourself – and working with an accredited financial professional like yours truly is a great first step to putting a plan together.
Tips to get you started:
- Get involved in managing the family’s finances. Spend 15-30 minutes a week discussing family finances. Review bank and investment statements monthly. Keep organized records. Being in control of your financial destiny requires that you be an active participant – not just by paying bills, but in overseeing your investments too. Letting someone else manage the money is one of our common financial mistakes as women.
- Pay yourself first. Learn more about your employer-sponsored benefit plans and make sure you contribute to your RRSP and TFSA as soon as you can.
- Be realistic about retirement and establish long-term goals, including future income needs. Women tend to live longer: a woman who is 65 today can expect to live to 85; a 65-year-old man can expect to live to 81. Understand how much money you’ll need for retirement and plan for these funds in advance – don’t just rely on your pension and things like Canadian Pension Plan (CPP) and Old Age Security (OAS) payments which will vary depending on your contributions, the age you elect to start your benefits and your income. You may also want to think twice about your appetite for risk and define it appropriately – we women tend to naturally be more risk averse in our investing, yet with longer time horizons, we have the ability to take on more risk to earn a needed, higher return.
- Encourage those close to you to start planning. If your close family and friends need your help, you are likely to help them, no? Talk to your parents especially about their estate plans and ask to review their Will, insurance and long-term disability or critical illness insurance coverage before they need care to reduce your future financial burden. It’s also beneficial to learn what being a Power of Attorney or Executor to your parents’ estate means, before the responsibility becomes clouded with emotion.
- Married women: Plan your financial life as if you will be on your own someday. Statistics are real. Nearly half of all marriages end in divorce. Women outlive men by several years. Plan your life with this in mind. Manage your finances together but have separate credit cards in your name to establish your own credit history. Make sure your name appears on all investment accounts. Don’t sign your joint income tax return without reading it. Get adequate life insurance coverage to cover expenses and replace earnings.
- Speaking of insurance … don’t hate it so much. Insurance seems to have a negative connotation associated with it and is therefore overlooked by many people. The most obvious reason to get life insurance is to replace your income in a time of need – but even if you don’t earn an “income” per se as a stay-at-home Mom, it can provide a financial safety net for the work you do running the household. Other “Living Benefits” to consider are disability, critical illness and long-term disability insurance – it’s cheaper than you think and like credit, obtainable and affordable when you don’t need it. The “Death Benefits” of life insurance are both personal and strategic – helping you to leave a lasting legacy to those you intended (and not to the CRA).
- If you don’t have enough to save for your child’s university fund and your retirement, your retirement takes precedence. Women think they’re helping their children by paying for their college or wedding. It’s a myth. You help your children by saving yourself first. If you retire without money to support yourself, you will become a financial burden to your children. There are loans for college and university, but there are no loans for retirement. The option of a family trust to create tax-efficient funds for their living and education expenses that go beyond tuition fees could also be something to consider.
- Know when to ask for help. Acknowledge what you’re good at and seek out the advice of experts when you need it. Get professional advice – look to someone you can trust and who you feel a connection with – and ask for genuine help & guidance. Don’t just settle for your partner’s financial advisor just because it’s convenient – if you don’t like him or even know him (odds are it’s a him), find your own. While you’re at it, check out these 7 key questions to ask any potential financial advisor.
This article is supplied by Dian Chaaban, an Investment Advisor with RBC Dominion Securities Inc. Member CIPF.
This information is not intended as nor does it constitute tax or legal advice. Readers should consult their own lawyer, accountant or other professional advisor when planning to implement a strategy. This information is not investment advice and should be used only in conjunction with a discussion with your RBC Dominion Securities Inc. Investment Advisor. This will ensure that your own circumstances have been considered properly and that action is taken on the latest available information. The information contained herein has been obtained from sources believed to be reliable at the time obtained but neither RBC Dominion Securities Inc. nor its employees, agents, or information suppliers can guarantee its accuracy or completeness. This report is not and under no circumstances is to be construed as an offer to sell or the solicitation of an offer to buy any securities. This report is furnished on the basis and understanding that neither RBC Dominion Securities Inc. nor its employees, agents, or information suppliers is to be under any responsibility or liability whatsoever in respect thereof. The inventories of RBC Dominion Securities Inc. may from time to time include securities mentioned herein. RBC Dominion Securities Inc.* and Royal Bank of Canada are separate corporate entities which are affiliated. *Member-Canadian Investor Protection Fund. Insurance products are offered through RBC Wealth Management Financial Services Inc., a subsidiary of RBC Dominion Securities Inc. When providing life insurance products in all provinces except Quebec, Investment Advisors are acting as Insurance Representatives of RBC Wealth Management Financial Services Inc. In Quebec, Investment Advisors are acting as Financial Security Advisors of RBC Wealth Management Financial Services Inc.