As the salary gap persists, more Ontario women are taking their finances into their own hands
At some point in their life, 9 out of 10 Canadian women will play the role of sole financial decision maker
Toronto, March 8, 2022 – Although women continue to earn less than men across Canada, including in Ontario, the salary gap is closing. "According to the Conference Board of Canada, between 2000 and 2016,1, 2 the national salary gap between men and women decreased by 24%, going from 23.9% to 18.2%," says Sophie Sylvain, a financial planner at Desjardins Wealth Management. "The salary gap doesn't only show up for lower- or middle-class earners. In the tax bracket for Canadians making over $270,900, women's median income is $362,300, compared to $393,200 for men. That's a $31,000, or 8.5%, difference."
In addition to the shrinking salary gap, the portrait of women investing in Ontario is also changing. Increasingly, women are embracing entrepreneurship and pursuing more education and training. They're also having kids later, having fewer, or not having any at all. However, they continue to prioritize their work-life balance, which keeps having a negative impact on their income.
Canadian women are more interested in their finances than their male counterparts
In light of these challenges in their Wealth Management, Canadian women are showing more interest in their finances. According to research, 69% of women say their finances are a high or an absolute priority. That's compared to 59% of men who say the same. For Canadian women, their financial security and that of their loved ones is paramount. Their values need to be reflected in their financial planning and in their assets, which will continue to grow in no small part through inheritances they receive because of a longer average life expectancy than men.
These are some of the takeaways that Sophie Sylvain, financial planner, and Caroline Marion, notary, tax specialist, financial planner and trust manager at Desjardins Wealth Management, want to highlight about the financial situation of Canadian women.
Women's four wealth management priorities
When it comes to wealth management priorities and the financial empowerment of women in Ontario, the financial industry sees a unique dynamic emerging. Women prioritize security over affluence, want planning decisions to reflect their values, prefer ESG investments and seek results they can predict over short term performance.
Good financial knowledge and support from professionals enables investors to make decisions with full knowledge of the facts. "It's time to dispel four persistent myths that are counterproductive for the financial security of women in Ontario," says Caroline Marion, who has extensive experience in estate planning.
Myth 1 - Common-law couples who have or adopt a child together quickly acquire the same rights as married couples.
This myth will not go away! The fact that a common-law couple has lived together for some time or has kids together does not give them the same rights as married couples in Ontario. The notions of the matrimonial home and the equalization of net family property don't exist in Ontario's Family Law Act for common-law couples. And the number of years they've lived together or the fact that they've had or adopted kids changes nothing.
If one partner dies, the surviving partner won't have a right to the assets they didn't own jointly. The same would apply in the event of a separation. Unless it's made official in a will, common-law couples in Ontario aren't recognized as legal beneficiaries of their respective estates. However, if a common-law partner was financially supported by their deceased partner, they can request dependant’s relief from the estate, even if they aren't named as an heir.
So where does the confusion come from? Possibly from tax law and most social laws, where common-law partners are recognised and given the same rights as married couples, so long as they've lived together for a defined amount of time, sometimes as little as a year.
Myth 2 - Women get lower returns than men because they're more cautious investors.
Ontario women place less importance than men on certain financial information, like quarterly portfolio earnings. However, they're more careful about planning monthly revenue to balance their budget and plan for the unexpected.
Women are increasingly informed and want to make their own choices about investments, particularly when it comes to making sure they reflect their values. Moreover, 46% of Canadian women want to make socially responsible investments. Other studies show that in general, women conduct fewer trades than men and keep their investments longer, which can often lead to higher returns than men, who do more trading, especially during moments of market volatility.
"Better overall financial literacy among Ontario women means they don't go for investment solutions that won't enable them to hedge against inflation and lose purchasing power," says financial planner Sophie Sylvain. "You can bet that as women fine-tune their investment knowledge, they'll be increasingly sensitive to how management fees can affect their return on investment."
Caroline Marion wants to remind working women in Ontario with defined benefit pension plans—especially those in health, education or children's services—that those plans represent the secure portion of their retirement portfolio. So they could benefit by putting their RRSP and TFSA contributions into vehicles with higher earning potential, like stocks.
Myth 3 - Financial planning only tells you whether or not your retirement savings match up with your retirement goals.
It's actually just the opposite! Financial planning involves figuring out how someone can reach the different goals they fix through the different stages of their life. According to the Financial Planning Standards Council, financial planning areas include legal aspects, insurance and risk management, financial management, tax planning, investment planning, retirement planning and estate planning. And it also happens to be an excellent way to improve your financial knowledge.
During financial planning, Ontario women frequently place a great deal of importance on saving for their kids' education, a goal that directly lines up with their values and becomes a priority. Another type of financial advice that women are eager to get is about ensuring their family's well-being in the event of incapacity or death.
When women step back to consider their choice of attorney for personal care and property if they become mentally incapable, they want someone they can trust. But it's also very important that the person chosen shares the same values. For example, they want someone who understands that if they regularly provide financial help to a loved one, that help should continue to be provided, even out of their assets which would otherwise be used solely for their benefit.
A personalized financial plan includes recommendations and strategies that cover every angle to make the best of a person's financial situation. Knowing that at some point in their life, 9 out of 10 Canadian women will play the role of sole financial decision maker, it's a must.
Myth 4 - Couples can wait as long as they want to claim common-law status for tax purposes.
The federal and the Ontario tax systems are based on the principle of self-assessment. Ontario taxpayers are required to provide the necessary information to enable precise tax assessment and the issuance of benefits. They can't just pretend they aren't in a common-law relationship and ignore the implications when it's time to file their taxes. Waiting to declare common-law status can lead to financial consequences, especially if someone is benefiting from tax programs based on family income. For example, the Canada Child Benefit, the GST/HST credit, the Canada Education Savings Grant, and the Canada disability savings grant and Canada disability savings bond are all calculated based on family income.
Tax laws recognize common-law couples if they've been in a conjugal relationship for at least 12 continuous months or if they've had or adopted a child together. But when does a conjugal relationship begin? It depends. The birth or adoption of a child are fixed dates, but the beginning of a relationship depends on the intent of the two individuals, so different people will think about it differently.
Because family income is considered when establishing the eligibility to some tax credits or benefits, it's common enough for couples in a second common-law relationship note that their financial dynamic is affected, especially if there's a significant difference in earnings. According to the Université de Sherbrooke research chair in taxation and public finances, only the person with the lower net income is eligible to request a childcare expenses deduction from the Canada Revenue Agency. And that can be a touchy subject when someone in their second common-law relationship is the lower earner but not the parent of their partner's child.
What affects Ontario women's level of savings and standard of living
- The wealth controlled by Canadian women will continue to increase, reaching 42% (or $3,200 billion) of all Canadian wealth by 2028, compared to 35% (or $1,400 billion) in 2016. Part of the increase can be attributed to inheritances women will receive, estimated at $900 billion, between 2016 and 2026.
- According to the 2016 census, 21.3% of couples in Canada live in common-law relationships, three times as many as in 1981 (6.3%). The numbers in Ontario and Quebec for the same year were 14.4% and 39.9%, respectively.
- Among the top 10% of Ontario earners, women make 37% less then men.
- Ontario women with a university degree earn an average of $69,063, while men with a university degree earn an average of $97,761, a difference of 41.6%.
1. The data in this release has been firmly established and confirmed by the Desjardins Securities Compliance Department.
2. The majority of the data in this release comes from the 2016 census conducted by Statistics Canada. Data from the 2021 census hasn't been analyzed yet.