The cents of a woman

Recent surveys highlight differences in how women approach finances


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Men are from Mars. Women are from Venus.

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Hey there, time traveller!
This article was published 31/03/2018 (1888 days ago), so information in it may no longer be current.

Men are from Mars. Women are from Venus.

That was the premise of a bestselling book from the 1990s about the emotional and social differences between the sexes when it came to relationships. Now, it seems a bevy of surveys shows when it comes to money management, men and women have their differences, too.

Among them is one involving data from robo-advisory upstart Mylo, which analyzed know-your-client questionnaires gathered from its investors. It found women are significantly less confident when it comes to financial literacy than men, with 50 per cent indicating they knew nothing compared to only 28 per cent of men. Moreover, women (25 per cent) are about half as likely as men (47 per cent) to favour risk in their investment portfolios.

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“The really dramatic finding, though, was women selected financial goals that were less than half of men,” says Amelia Young, a chartered financial analyst and founder of Upside Consulting, which specializes in helping the investment industry empower investors — women and men.

Mylo’s study found on average, men had savings goals of about $48,000 whereas women aimed to save about $25,000.

Women aimed to save for more education, a wedding and health care. But in other areas — such as a car purchase, a home and debt repayment — they had less lofty goals than men. While the data did not reveal savings goals for retirement — in part because Mylo has yet to offer RRSP accounts to its investors — Young says the data indicate women could face more challenges when it comes to finances.

It’s well documented women deal with societal biases that affect their financial well being. Statistics Canada data, for example, show women with a bachelor’s degree earn about $13,700 less annually than men with the same credential.

But Young says plenty of research besides the Mylo one also shows women are less confident and more risk averse than men when it comes to investing.

“And if you’re setting goals that are so much lower, you’re handicapping yourself out of the gate,” she says. “Of course, the jury is still out where they actually have lower knowledge.”

Young adds she worries this kind of research perpetuates stereotypes regarding women and money when the goal should be to empower them — and men — to be more knowledgeable and confident regarding financial matters.

After all, most Canadians could use the pep talk. We’re growing more indebted by the day. At the end of 2017, an Equifax report found each Canadian owed on average $22,837. Additionally, a recent CIBC poll highlighted Canadians need an average of about $750,000 to retire, but more than 90 per cent of us don’t have a plan to reach that goal.

It found also women are less likely than men to be prepared.

In part, this may be because traditionally, men had taken the lead role on major financial decisions. In fact, a recent Investment Planning Counsel (IPC) survey of high-net-worth clients supports this, finding 74 per cent of men handle the major financial decisions. By contrast, only 46 per cent of women indicated they were the chief decision maker.

Margaret Clarke, a financial planner with IPC, says she has seen how this disparity can lead to problems, particularly for women, who generally outlive their male counterparts.

“If, all of a sudden, you become single, whether you’re divorced or widowed, it can be overwhelming,” she says. “A lot of the times, when women are single again, they need a 30 per cent increase in their income just to have the same cost of living.”

Moreover, women are more likely to take time off work to raise children, or care for aging parents — both of which can impact their savings and pension benefits, she adds.

Once again, women generally felt less financially literate than men, the IPC survey found. Making matters worse is diving into the dark pool that personal finance can appear to be is intimidating. In part, this is a side effect of an industry that is still largely a male-dominated sphere, Clarke says.

“I do believe that sometimes, people communicate in different styles and regardless of whether someone is male or female, you need to explain things in terms they are interested in and comfortable with,” Clarke says. “But I think as a whole, women do tend to shy away from investment decisions and do have lower levels of knowledge” in this area.

Young adds much of the data also speak to a broader issue where women are not equally represented in STEM (science, technology, engineering and math) jobs.

“I believe that there probably is a lower level of advanced financial knowledge amongst women that is highly correlated to the well publicized issue of women not excelling in STEM fields.”

While plenty of initiatives aim to boost the number of women in these fields, Statistics Canada data show over the past 30 years, the numbers have only risen slightly from 20 per cent of STEM jobs occupied by women in 1987 to about 27 per cent in 2017.

“If we had equal representation of women in those fields, we would see a smaller problem of women being intimidated by complex financial issues,” she adds.

Math-induced anxieties are certainly not exclusive to women. But past experience obviously influences the conditions of today, she says.

“One of the key things about motivation is that people only do things and take on challenges when they have some belief that they could succeed at them.”

When girls don’t see a lot of women working in a respective occupation, for instance, they are less likely to want to pursue a career in that field.

“It’s a vicious cycle,” she says. “It takes exceptional trailblazers to do that and not everybody is like that.”

She points to the investment industry as a good example of this, where the percentage of women working as investment analysts “has been stuck at 20 per cent women forever.”

And a 2016 report by the CFA (Chartered Financial Analyst) Institute concluded this is more than just a problem of equality. The whole industry — and investors — suffer for it because this lack of gender diversity leads to deep biases. Undoubtedly, analysts can be of like mind based on the data they see regardless of sex. But women and men do tend to approach investing differently in important ways, says JP Harrison, president of Genus Capital.

The head of an investment firm specializing in sustainable strategies says it recently conducted a poll that found women twice as interested as men in environmentally-friendly investment.

“We certainly see that with our clientele.”

He adds the firm first got involved in green-minded investment strategies at the urging of one its high-net-worth female clients in 1993.

“The other thing we notice is women seem to believe that socially responsible investing can get as good performance or better” than more mainstream strategies.

And the industry is increasingly embracing strategies promoting social good and environmental issues, Harrison notes. This is largely driven by women, he adds. Moreover, the trend makes the industry more appealing to women — and men — who may have been previously turned off by persisting stereotypes of greedy Wall Street traders.

Young adds boosting women’s presence in the industry as well as their confidence as investors largely boil down to how we present choices to people.

“You frame choices in a way that shift people’s thinking without them realizing it.”

In this sense, even these aforementioned studies are problematic.

“There is a risk of perpetuating a cycle that women just aren’t good at this,” she says. “If we approach from the perspective that obviously women are capable investors, it sets an expectation that compels people to figure it out.”


Updated on Saturday, March 31, 2018 9:20 AM CDT: Photo added.

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