Insights
Periodic insights from our Investment and Private Client Teams on a broad range of investment and advice-related topics
By Sarah Bull, Partner & Portfolio Manager
The goal of Financial Literacy Month—to help Canadians build the skills to make informed financial decisions—is certainly a noble one, but the challenge is immense. One recent survey found that most Canadians have not received any financial education in school. Another suggested that fewer than half have a will, and only about a third have an estate plan. A 2019 study by the Financial Consumer Agency of Canada (FCAC), the government organization that sponsors Financial Literacy Month every November, found that more than a quarter of Canadians borrow money to pay for food or other daily expenses. There is also—sadly—a persistent gender gap. According to a 2020 study by researchers at Université du Quebec à Montréal (UQAM), Canadian women score lower than men on measures of financial literacy and feel less confident in their ability to make financial decisions. Not surprisingly, they also experience generally worse long-term financial outcomes than men do.
Faced with data like that, the challenge of financial literacy might seem too big for any special “month” to solve, and it probably is, at least at the level of public policy. But the good news is that, on a personal level, improving financial health and securing your financial future does not have to be looked at as an insurmountable challenge. With a little education and commitment, it’s a goal that anyone can achieve. Often, small steps can make a huge difference.
That is why the theme of this year’s Financial Literacy Month—“Talk about it!”—is particularly appropriate. It might seem a very small thing, but talking about your finances with your family, and most importantly your spouse, can be crucial to making informed decisions about money. And that often applies particularly for women.
I have written previously about how women are making important strides in the realm of finance, but there is still a long way to go towards bridging the financial empowerment gender gap. I still sometimes see it at play in my work supporting high-net-worth families, when wives will defer to their husbands in all matters financial and the men are not only the decision-makers but also the keepers of knowledge about family wealth. That non-division of labour and information might work out fine for a while, but over the longer term it can put the long-term financial health of the woman—and indeed the entire family—in a precarious position.
The reality is that no one knows for certain what the future holds. Marriages sometimes (often?) dissolve, and if that happens, the process of dividing assets, negotiating spousal and child support, and resolving a host of other issues can become far more complicated—not to mention potentially unfair and expensive—if one spouse knows everything about the family finances and the other knows nothing.
But divorce is only one of the risks. If the spouse who has all the financial information suddenly is out of the picture because of death or disability, their partner can be thrown into an unfamiliar world about which they are poorly informed and that they are ill-equipped to navigate. If the surviving spouse is not privy to their partner’s legacy and estate plans, dealing with lawyers, the probate process, other family members, executors, even funeral planners—well, it can all get quite overwhelming, not to mention expensive and time-consuming. Even worse, the time and money spent resolving these issues can eat into the estate, impacting the financial well-being of the entire family.
On a very practical level, if one partner alone holds the keys to the family finances—literally, these days, in the form of computer, phone and account passwords—death or disability can mean that no one can easily access the family’s digital accounts, even if those accounts are jointly held. In the analog world, I have seen instances where a surviving spouse could not open a safe deposit box—because her deceased partner never told her where the key to it was—even though it was jointly leased.
Perhaps the most effective way to mitigate these risks is straightforward: participate in shared, honest and open conversations with your spouse about family finances, and hold those conversations on a regular basis. In other words, talk about it.
What should these “money talks” cover?
- The conversation can begin with the subject of “Mine/Yours/Ours”—that is, who owns In any relationship, there are some household assets that may belong to one partner or the other, or to both. Figure out which “bucket” the family wealth falls into.
- Then, you can move on to household expenses—who pays for what. Understand your household’s cash flow and ensure it is both equitable and sustainable.
- Discuss retirement planning and estate planning. Ensure that you and your partner are on the same page, and that the beneficiaries, executors and powers of attorney for each of you are appropriate and up to date.
- Finally, write it down. If you come to a new agreement or consensus on financial matters, it will be legally stronger and more useful practically if it is well documented. If you leave the conversation with unanswered questions or concerns, write those down, too, and make sure you follow up to get answers.
I understand that having conversations like this may be difficult or awkward for some women. Family dynamics can be complex, inertia is a powerful force against change, and the topic of money can be stressful. One approach to tackling these concerns is to solicit the help of a trusted advisor, who can sit in on these money talks, provide support, ensure the right questions are asked and answered, and navigate any roadblocks.
One last thought: I mentioned above that holding the family financial conversation is about mitigating risk, and it is. But there’s more to it than that.
For one thing, there is an opportunity cost to excluding one partner from financial decision-making. We can all bring a different set of values and new ideas to the table, and alternative perspectives may provide a valuable addition to the family’s financial health. When it comes to money, two heads really can be better than one.
Finally, there is the matter of what’s right. Women who are partners in a marriage are exactly that—partners—and they have an expectation and a right to be informed about and involved in decisions about their financial future. And isn’t that what the spirit of Financial Literacy Month is all about?
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