According to BlackRock Asset Management Canada Ltd., only 41% of women say they know how much income they will need in retirement, vs. 51% of men. Not only that, but the global gender wage gap won’t close until 2095, says the World Economic Forum. In Canada, StatCan clams that the gender wage gap smaller than in the United States, but it’s still there, with women earning almost $0.82 for every $1.00 earned by men.
If you are a woman, there is a good chance you are falling behind. So how do we change this? Here’s what you need to know about closing the financial freedom gap.
Why is there a financial freedom gap?
When it comes to women and money, and the financial freedom gap, many people point to the fact that women earn less than men and assume it must be due to discrimination. However, while gender discrimination remains an issue, it’s not the biggest reason for the gender wage gap. Other issues are more likely to influence the reason that women still, overall, make less than men:
- Professions that women choose: Traditionally, the jobs that women do pay less than the jobs that we stereotypically associate with men. There are still more men in boardrooms than women, and women are still more likely to be teachers. The pay disparity in those cases is rather large.
- Women are more likely to work part-time: Many adult women are more likely to work part-time than men. That is part of the reason for a gender wage gap.
- Women are still more likely to be caregivers: Part of the reason that many women work part-time or in lower-paying jobs is due to the flexibility that often comes with such careers. Women are still, statistically speaking, more likely than men to be the primary caregivers of children. The National Centre for Women and Retirement Research indicates that the average woman spends 15% of her career outside the paid workforce to care for others, missing out on years of raises and promotions and putting them behind in earnings.
- Starting salaries for women are likely to be lower: Many women don’t negotiate their first salary. According to research in the United States, women can leave as much as $500,000 on the table over a lifetime due to a failure to negotiate a first salary. Your future salaries, bonuses, and raises are all based on that first paycheck, and if you don’t negotiate, you might be missing out.
The gender wage gap isn’t the only issue that comes into play when we talk about women and money and the existence of a financial freedom gap. The fact that women are more likely to stay home and be caregivers to children and elderly parents means that they have smaller amounts to put into retirement savings, and they might miss out on opportunities to improve their skills and education.
Another concern is the fact that women are less likely than men to invest in a way that builds wealth. Only 19% of women are comfortable investing directly in stocks, according to BlackRock Asset Management Canada Ltd., as compared to 37% of men. This means lower yields for women over time if they don’t change their investing habits.
Closing the financial freedom gap
Now is the time to get real about women and money and the realities that many of us face. There’s nothing wrong with the path you choose if you find it fulfilling and worthwhile. However, you do need to realize that what you do (or, rather, don’t do) with your money now could contribute to a financial freedom gap later.
Here are some ways that you can work to close your own financial freedom gap:
- Partner RRSP contribution: In Canada, it’s possible for your spouse or common-law partner to contribute to your RRSP. If you are staying at home to be a caregiver, make sure you are getting these contributions. This becomes especially important if you want to build your account in case of outliving your partner, or to make up for the fact that, according to StatCan, almost 40% of Canadian women will be divorced before their 30th wedding anniversary. You need those assets, even though you’re missing out on earnings due to caregiving.
- Get paid what you’re worth: Research what you should be getting paid according to your experience and education in your local area. Ask for what you’re worth, and learn negotiation skills so you can receive a higher salary. Be sure to increase your retirement and other savings each time you get a raise.
- Start a side gig: You can increase your financial freedom, even if you stay at home or work part time, with the help of a side gig.
- Learn to be more comfortable with investing: Do your research. When it comes to women and money, there is still a lag in the area of investing. Understand that your savings account won’t offer a large enough return to build your wealth. Learn about index investing, which is a strategy that many women are more comfortable with, to add stocks to your portfolio to help you grow your wealth.
Don’t let the financial freedom gap affect you later on. Now is the time to educate yourself about your options, understand the causes of the gender wage gap, set new financial goals, and take steps to protect your financial future.