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Money Cents Article May 06
The long term affects of spending vs. saving:
Women face many challenges when saving for the future. Unfortunately, studies show
we have a failing grade. The problem begins when we are young and due to various
reasons, does not get better as we approach retirement. Consumerism, lack of financial
education and the fact that we often outlive our spouse work against us financially. The
combination of nurturing our family and the tendency to put everyone else first can lead
to some pretty skimpy bank accounts. This issue is apparent in three stages of our lives.
Young single women, statistically, have shown to be poor at saving money. This group is
heavily marketed to by advertisers and they are buying into the propaganda. There is a
social aspect to shopping and pressure to be stylish no matter what the cost. I saw a print
ad the other day that had a picture of a young woman looking at a skirt in a window and
asking herself if she should buy the skirt or pay rent. Isn’t it strange that a piece of
clothing should be more important than a place to live? There is a lack of understanding
in regards to financial issues and usually very little money tucked away for the future. A
2005 study by the Consumer Federation of America showed that “young women were
particularly poor savers: 55% of women ages 25 to 34 had less than $500 in an
emergency fund. And 42% of all women said they had no emergency fund at all.” This is
an American study, but Canadians are almost equal consumers. Education on money
issues and the benefits of compounding interest should be addressed early in school and
home.
Parents often struggle to save for the long term and will regularly put the needs and wants
of their children first. Needs should come first, but the “wants” are where we get into
trouble. This can have a dramatic negative long term affect. There can be a lot of guilt
around parenting. We want to have our children enjoy the benefits of music lessons and
sporting activities. There can be pressure to dress in name brand clothing. This can take
a bite out of anyone’s budget. It can be a difficult to prioritize. As a parent is it better to
save for retirement over hockey camps? Do you plan for the future or take the obligatory
trip to Disney? It looks like many are choosing the “play today, pay tomorrow” plan. A
Statistics Canada Survey from March 2005, showed that: Canadian households have
been spending more and saving less during the past two decades. As a result almost onehalf, or 47% of all households were spending more than their pre-tax income in 2001, up
from 39% in 1982.
A two parent working family may struggle with these issues but it can be extremely
difficult for a single parent family where money issues can be a daily struggle and
groceries and heat come ahead of RSP’s. Women often put their financial future last on
the list. They may feel selfish to think of themselves above the immediate needs and
wants of the family. The consequences of bad planning are apparent in the last group of
women.
Statistically, single women and widowed retirees often live below the poverty line more
so than their married counterparts. Many senior women slipped into low income as a
result of widowhood, as measured by Statistics Canada’s Low Income Measure.
Furthermore, once these senior widows slipped into low income, it was very difficult for
them to climb out. Statistics Canada, July 2004. Also, family responsibilities can lead to
an unexpected early retirement. Household and family matters tend to influence a
woman's decision to retire much more than they do a man's. For example, in 2002, 12%
of women retired to take care of a family member, while only 6% of men did the same.
The Daily, March 2006, Statistics Canada.
These observations should not be taken as doom and gloom. There are many simple
steps that can be taken along life’s path to alleviate these monetary issues. Younger
women should consider starting a long-term savings plan. Families should consider a
balance between fun, activities and long term planning. Saving for retirement should be a
non-negotiable budget issue. Pre-Retirees should review their retirement plan often and
ensure there is a contingency strategy if one spouse predeceases the other.
Emily Rae, CFP is a Financial Advisor with Assante Capital Management Ltd. (Member
CIPF). Assante Capital Management Ltd. is a member of the Canadian Investor
Protection Fund and is registered with the Investment Industry Regulation Organization
of Canada. Please contact a professional advisor to discuss your particular
circumstances prior to acting on the information above. Emily can be reached at
[email protected] or 902-499-9416. The opinions expressed are those of the author and
not necessarily those of Assante Capital Management Ltd.