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Published March 3, 2022

6 Ways Women Can Financially Plan for a Longer Life

Women live longer than men, which means more life to plan for. Being aggressive with savings and investing, and careful about debt, can set women up to thrive.

The average life expectancy of Canadian females born in 2021 is 84 years, while males are expected to live 80 years, according to Statista, a provider of market and consumer data. In contrast, the worldwide life expectancy of those born in 2021 is just 75 years for females and 71 years for males.

A longer lifespan is a marvelous thing, allowing more years with family or to explore interests, but it also necessitates careful financial planning, especially for women.

» MORE: How to save money

How does life expectancy impact women’s finances?

Around the world, women face intersectional financial disadvantages, including professional and societal biases that hinder earning, saving and investing.

One of the biggest culprits is the gender pay gap. Even today, women in Canada earn significantly less than men. According to the Canadian Human Rights Commission, in 2020 women earned $0.89 for every $1 earned by a man. And this wage gap is even larger for women who are newcomers to Canada, Indigenous and racialized women, and women living with a disability.

Women also tend to have fewer working years than men, due number of factors that can disrupt a woman’s career, such as becoming a parent or taking care of a sick relative. On average, women are far more likely to sacrifice their careers in order to be a caregiver for a loved one if needed.

In March of 2021, the Royal Bank of Canada released a report that found nearly half a million Canadian women who had left their jobs during to the COVID-19 pandemic had not yet returned. This may be due in part to the fact that women were often expected to be the primary caregivers of school children who had to stay home during lockdowns. However, another factor is the types of businesses that were forced to close during lockdowns, such as those related to childcare, education, hospitality and tourism — industries that rely on a predominantly female workforce.

These and other disadvantages can make it harder for women to save money at the best of times. But with strategic financial planning, women can mitigate inequity and prepare for longevity in a way that allows them to thrive.

Financial planning strategies for women

1. Start saving for retirement early

When it comes to retirement, when you start saving is more important than how much you can stash away. Starting early unleashes the power of compound interest, which allows you to earn interest on interest. The longer your money sits in a savings or investment account, the more it can grow all on its own.

For example, $5,000 invested at an average rate of return of 6% compounded monthly will grow into $9,096.98 after 10 years. And that’s without ever depositing another dollar! But, if you left that same initial investment alone for 30 years you would end up with $30,112.88. And if you continued to add to the balance each month, growth would be even greater.

» MORE: How much money you’ll need to retire

2. Prioritize your emergency fund

An emergency fund is quickly accessible money that can be used to cover unexpected expenses, rather than having to go into debt. Experts often suggest saving at least three months of living expenses. though it’s recommended that women save more as they’re more likely than men to face career disruption. And, if they have children, the emergency fund will need to provide for more than just one person. If that goal is daunting, start by socking away what you can until you have $500, and keep building from there.

3. Boost savings by using the right accounts

There are many types of accounts in which to stash savings, but those that are tax-free or tax-deferred are an especially good choice. A TFSA is a tax-free savings account, which means you won’t pay taxes on any interest earned on the money held in it. A registered retirement savings plan, or RRSP, is a tax-deferred account, meaning you won’t be taxed until you withdraw the money — and you may be able to get a tax deduction for your contributions.

» MORE: How to compare TFSAs and RRSPs

4. Be strategic about debt

Being debt-free may not be a reality right now, but accumulating high-interest debt is something to be avoided when possible, as it can impact your credit score and ability to qualify for other types of credit, like a mortgage or car loan. If you have debt, create a strategic plan to pay it off. The snowball or avalanche strategies are both good places to start.

» MORE: How to deal with your debt in 2022

5. Find a way to invest

Women tend to be more cautious when it comes to investing, which is sometimes fueled by a lack of investing education or the perception that investing is time-intensive. While there is risk associated with any investing, avoiding it altogether can greatly hinder your ability to build wealth over a lifetime. Thanks to online investing platforms and “set it and forget it” robo-advisors, it can be possible to start with just a small amount of money and time. Much like saving for retirement, investing is a long-term game. The earlier you start, the more time your money will have to grow.

» MORE: How to invest in a TFSA

6. Create an estate plan

Building financial security for yourself, while you’re working and in retirement, is only one part of planning for a longer life. Women should also consider how they want their assets to be handled as they get older, and even after they have passed away. A comprehensive estate plan can help you inventory your assets, name beneficiaries, make advance decisions about your healthcare and finances, and arrange guardians for your children and pets.

About the Author

Hannah Logan

Hannah Logan is a writer and blogger who specializes in personal finance and travel. You can follow her personal travel blog EatSleepBreatheTravel.com or find her on Instagram @hannahlogan21.

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