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Ladies, start saving 20 per cent for retirement

Women can unlock their financial potential by growing their financial confidence.

The Wealthy Barber was the very first book I read about personal finance and the most important rule I learned was to save 10 per cent of everything I earned towards retirement.

When I crunch the numbers today, however, it turns out that women need to save 20 per cent of their gross earnings to counteract three factors.

First, due to medical advances and genetics, women live longer by up to a decade.

Second, old-school financial plans assumed that women would remain married, thus benefiting from a larger pool of household wealth. But, statistics show that 50 per cent of today’s women dissolve their marriages, leaving them with half the retirement funds they would have had.

Last, and most annoyingly, Statistics Canada continues to report that in 2018 women still make less money than their male counterparts for doing the same jobs because of Canada’s gender pay gap. Efforts are being made to remedy this injustice, but it will take time for organizations in Canada to get out of the dark-ages and pay all people equally.

The fear for women investors is if they don’t save enough for retirement, they’ll run out of money and end up impoverished. Here are my top tips for women to prepare in the easiest way possible.

Save through automation

I have set up automatic banking transfers on each Tuesday of every week from my chequing account, where my pay is deposited, into my Registered Retirement Savings Plan (RRSP) and Tax Free Savings Account (TFSA). Both offer tax advantages, making them the best vehicles to save within.

The transfers happen in my sleep, which removes the human error of me forgetting to manually transfer the money. Then, I plan my weekly spending with whatever money is left over in my chequing account.

Boost savings through your job

Not everyone has a work pension or Group RRSP, but if you do, take advantage of it. The money is often matched by the employer to a certain extent and it’s automatically deducted from your paycheque before you get the chance to spend it.

Take the right risks at the right times

Women have a bad track record of not taking enough risk with their investments. Some of the most cited reasons, according to, for this are lack of knowledge, feeling uncomfortable with their investment advisor and not wanting to lose money. But smart, age-appropriate risks are necessary for investment growth.

Investment risk is between a 1 (low risk) and 5 (high risk). At the low end of the spectrum, you’ll find safe investments like Guaranteed Investment Certificates or government bonds. At the high end of the spectrum, you’ll find aggressive growth stocks like cryptocurrency and cannabis. In the middle, which happens to be a very suitable spot for new investors, you’ll find investments or funds that are the most well-known companies in the world, like General Electric or Coca-Cola.

The best way to work the risk scale is to start at 5 in your 20s, then move down the scale with every decade of your life. Obviously, as you get older, you won’t want as much risk because you’ll need to protect your nest egg for retirement.

Work with a professional

According to Ellevest, an exclusively-women financial planning service, nearly 86 per cent of financial advisors are men in their 50s and 60s. Many younger professional women find they can’t relate well to them. But, not all investment advisors are commission-hungry men. Women are actually the fastest-growing demographic of top advisors in the country.

The best advisors will call you when it’s time to make an important financial decision to your retirement portfolio and they’ll meet with you at least one per year. Don’t sign up with just anyone; get a referral from a friend or family member.

Watch your fees

If you don’t feel like you’re getting good value for your investment fees from a traditional investment advisor, then robo-advisors are a good option. The cost is lower and your money is digitally managed in a pool alongside other people that share the same risk tolerance. There are rumours swirling in Canada that we will soon see a women-focused robo-advisor alongside the top robo-advisor firms WealthSimpleNest Wealth and BMO Smartfolio.

The amazing capper to all this is that data shows women make good investors. In 2017, Fidelity published that women generate a higher rate of return on their investment portfolios by nearly half a per cent. The key to unlocking our financial potential is growing in our financial confidence.

Published by on April 22, 2018.

Related Content: Gender Diversity is the Key to Unlocking $150 Billion in GDP