Published November 12, 2024 • 4 Min Read
TLDR
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While progress has been made in recent decades, a gender gap persists when it comes to money.
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From notable income gaps between men and women to caregiving responsibilities, women face significant impacts on their financial health.
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The good news is there are strategies to help women manage life’s financial challenges and take control of their financial health.
Creating a life of financial independence is essential for women. We all want the freedom to make choices that align with our personal and professional aspirations.
Despite significant progress in recent decades, a gender gap still exists in many areas of finance. In this article, we explore some of the unique challenges women face offer strategies for achieving financial independence and offer tips on how to prepare for key life events that may impact a woman’s income.
A gender gap still exists
While women today don’t require the support of her father, brother, or partner to open a bank account, get a credit card or tap into investment prospects — as she would have as recently as the 1970s — financial disparities remain. According to Statistics Canada, working women between the ages of 25 and 54 earn approximately 89 cents for every dollar men earn. While this puts Canadian women ahead of their global peers, economic parity should be the goal.
Contributing factors include career-stalling breaks for family caregiving, underrepresentation in high-paying industries and lingering workplace biases that restrict women’s earnings.
Conversations that close the pay gap
One of the fastest ways working women can improve their income is by initiating conversations with employers about their salary and job benefits. Research what similar jobs in your industry earn, and take stock of your contributions. Women are often shocked to find out how simple these negotiations can be — once they get to the table.
Taking control: The importance of financial literacy
Financial literacy plays a crucial role in achieving economic independence. Take the time to learn and understand pay equity, budgeting and investing. Education and empowerment exist for women and girls at every income and age level.
Invest
Studies show that women have slightly less knowledge and confidence about investing than men, and men are more likely to invest. Take the time to learn about investing and get started. Women have a superpower: They are more consistent, less speculative investors, a key to steady and superior investment growth.
Build an emergency fund
An emergency fund is crucial. At a minimum, it should cover three months of living expenses. Set up a direct deposit to fund it automatically in a high-yield savings account for quick access. Investing in stocks, bonds or even real estate allows you to grow your emergency fund much faster than saving in traditional accounts[1] .
Budget and manage spending
Knowing what your life priorities are — and having a realistic view of income and expenses — will help you live within your means and stay on target with saving for future goals. Easy-to-use budgeting apps abound, or just set up a spreadsheet. You’ll make smarter decisions that prioritize your values.
Manage debt
Debt can significantly obstruct financial independence. If you have debt, don’t ignore it- make a plan to pay it off. Tackle high-interest debt first. You can also consolidate credit card debt on a no- or low-interest card. Many debtors have amenable repayment plans and terms . Above all: Don’t accrue more debt.
Prepare for Times When Income May Be Reduced
Life events such as parenthood, divorce, and widowhood can significantly impact your financial situation. But with some forethought, you can mitigate financial stress.
Parenthood
For some women, parenthood can lead to a career break, reduced working hours, or even a career change. This can reduce income — both current and future — while expenses increase. If possible, look for job opportunities with more flexible or remote arrangements to reduce childcare expenses.
Divorce
Divorce isn’t cheap and can lead to significant financial instability. Understanding your financial rights and obligations is essential, so seek professional guidance. Double down on a side hustle or retrain to build a strong base for financial stability.
Widowhood
Losing a spouse can be emotionally and financially devastating. It’s never too early to obtain life insurance or create an estate plan. Gain a clear understanding of the benefits you might be entitled to, such as Social Security or a pension.
With sound financial literacy, you can take control of your finances, advocate for a pay increase, begin your investment journey, and plan for inevitable life events. Start today. Your future self will thank you for it.
This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.
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