Despite an economic recession that has decimated investment portfolios and dented retirement dreams, only 30 per cent of Canadian women have pulled together a formal financial plan, according to research released Tuesday.
A TD Waterhouse poll of female investors found that while 97 per cent of those surveyed said that assuring a comfortable standard of living during retirement is a top financial goal, only 20 per cent were "very confident" they could achieve this.
"We have not come along as far as we would have liked to," Patricia Lovett-Reid, senior vice-president at TD Waterhouse, said of the results. "Women say they care about managing their expenses but...I am concerned that they have not figured out what it really takes to put together a financial foundation that they are comfortable with."
Ms. Lovett-Reid is worried that financial education among women has advanced in incremental changes, as opposed to leaps and bounds. "When it comes to goals and money, I don't think goals should be nebulous. People should be able to tell you in definite terms what it means when they say they want a comfortable retirement and a good lifestyle. And some of these women can't."
When it comes to goals and money, I don't think goals should be nebulous. People should be able to tell you in definite terms what it means when they say they want a comfortable retirement and a good lifestyle. Patricia Lovett-Reid, TD Waterhouse
Ms. Lovett-Reid doesn't think people should panic if they haven't started saving for retirement in their 20s or 30s, provided they have been chipping away at major debts like mortgages. Once those debts are eliminated and other financial responsibilities - such as a child's education - are taken care of, people can turn to aggressively planning and saving for their golden years.
The TD poll, based on 1,432 interviews with women aged 45 to 64 years old and conducted between Sept. 1 and 7, found that the other three top financial goals of women were comfortably managing day-to-day living expenses, saving for emergencies and paying off credit card balances and loans.
Spending and investing
The recession has not affected investing behaviour among most women, with 73 per cent of those polled saying they have made no changes in the past year to the level of risk they take when investing. In fact, 7 per cent of those surveyed said they are taking advantage of the drop in stock prices to invest more in mutual funds and stocks. The minority of women who did make changes said they switched to lower-risk investments such as GICs.
Women are generally more risk-aware than men when it comes to investing, Ms. Lovett-Reid said, which means that heading into the downturn, they were already more cautious in their approach. Women, who tend to do their homework and know their risk horizon when investing, are therefore more likely to stick with their established financial plan.
That said, 52 per cent of the women polled said they were "mildly concerned" or "worried" about the state of their investments, while 44 per cent said they are "reasonably contented. The concerns range from feeling they are missing opportunities due to a lack of knowledge to worrying they have not done enough to retire comfortably.
Spending patterns, on the other hand, have certainly been altered by the economic downturn. Of the 50 per cent of women polled who said they made a change, 48 per cent said they postponed major purchases, 46 per cent charged less on credit cards in order to avoid interest charges, and 40 per cent reduced or stopped their spending on non-essential purchases.
"This recession has been a huge wakeup call for everyone," Ms. Lovett-Reid said. "People are looking to rebuild and move forward and in doing that are looking at their discretionary spending. They are not shutting it down altogether, but there is a lot more discussion going in households on than before. That is a good thing."
Money and spouses
One survey finding that came as a surprise was that 65 per cent of women polled by TD agreed that women should be "completely financially independent" from their spouse, with women who have previously been married backing this statement most strongly.
"When you look at relationships and money, you don't want to be dependent or independent, you want to find that balance where you will be inter-dependent," said Ms. Lovett-Reid. "There is no one cookie -cutter solution for every relationship, but this needs to be worked out. It is mostly about full, plain and absolute disclosure."
Building a life together involves an emotional and financial commitment, she said. "It doesn't mean you cannot have separate bank accounts or investment portfolios. But if you expect to build a relationship on honesty and trust, you need to openly discuss your financial elements. If you don't, how can you achieve a level of financial comfort in your home?"
Ms. Lovett-Reid's advice for couples when it comes to financial matters is not to try and do it all themselves. "You do not need to manage all of your money yourself in a relationship. But if you have a co-mingled assets, portfolio and bank accounts, you do not want to abdicate responsibility. What you both need to be is engaged and involved."
Some of the other findings of the TD poll, relating to women and financial independence:
* While all of the women surveyed have at least some input into household financial matters, married women are significantly less likely than those who are not in a relationship to say that their role includes managing household investments (45 per cent v. 76 per cent), retirement saving and planning (61 per cent v. 86 per cent) and dealing with a financial professional (49 per cent v. 77 per cent)
* Most married women, 71 per cent, are being proactive by having at least some savings/investments in their own name, entirely separate from those of their spouse.
* While most married women have their own personal portfolio, only 48 per cent of them take full responsibility for making decisions about their investments. A minority, 14 per cent, completely defer to their spouse, with the balance, 38 per cent, make decisions jointly.
* Overall, 24 per cent of women equate being financially successful with being financially independent from their spouse/partner.
* While only 3 per cent women select "keep your finances entirely separate from your spouse/partner's" as the one piece of financial advice they would give to other women, it is interesting to note that women who have been, but who are no longer in a relationship are more likely to chose this (7 per cent) than are those who are single or married (2 per cent).