Thrifty Thinking: Women and Financial Literacy

Financial Finesse recently released a report titled Gender Gap in Financial Literacy. Financial Finesse is an unbiased financial education firm. Some key findings from the report include: 

- Women are falling further behind in many key areas of financial planning, most notably in two critical areas: money management, which is the foundation of all financial planning, and investing, which is crucial to women being able to build wealth.
- Women’s confidence in their retirement preparedness has slipped and they are still behind men in terms of how much they are saving for retirement, but the gender gap in retirement planning is smaller than most other areas, with virtually no gap between men and women with respect to participating in 401(k) plans or IRAs.
- In general, women are doing a better job at planning for longer term goals and protecting their wealth, but are having a harder time with basic money management skills and investing, both of which are more transactional in nature and often entail more hands-on management and quick decision making.

I had the chance to interview Diane Winland, CFP and Resident Financial Planner with Financial Finesse.

 

1) What are some of the reasons women lag behind men in money management and investing?

 

In general the gap may be part societal and part financial. Although about 40% of women are the primary breadwinners in their households, women have traditionally not been the financial person in the family structure. Historically women have been raised to care for the household and family member and not concentrate on financial matters. However women are now a majority of college graduates in the U.S., so maybe we will see more of a shift in this dynamic. 

 

As for the financial part, we usually see a gap in terms of income with women on the lower end. Since many of them may be the financial head of the household, it may be that there is less money to spread around. Couple a limited budget with women's tendency to put their own needs at the end of the "list" and you have a situation where caring for parents or children take precedence over saving and investing.     

 

2) What are some easy way for women to become more involved in household money decisions?

 

Even if a woman is not the main financial person in the house, she can most certainly be involved with financial decisions and monitor normal monthly expenses. One way that lots of couples make sure they stay on the same page is to have a monthly money meeting, or a financial summit. During this time each person can review income and expenses, check on debt and progress toward reducing it, and make sure that things like retirement savings are on track. One thing for women may want to watch for is depending too much on their spouse or partner. As an example, if one person  is the predominantly the saver for things like retirement then a major change in the house (death, divorce, serious illness or injury) can put that goal in serious jeopardy.

 

3) Why is it important for women to share responsibility in financial matters?

 

Women face more challenges when it comes to overall financial planning than men do. Women tend to live longer resulting in not only a longer potential retirement but also an increasing probability that they will be solely responsible for financially supporting themselves for at least some portion of their lives. Combined with higher lifetime healthcare costs and lower pension and Social Security payments (due to lower salaries or interruptions in their careers to care for family members) the need for saving and investing for retirement becomes an important part of a woman's overall financial plan.  

 

4) How can women improve their own financial literacy if they have no idea where to start?

 

This is where the good news comes in. The best thing to do is seek out information, and women in our Gender Gap study are doing just that - at about twice the rate as their male counterparts. Seek information from a financial planner, a CPA, or better yet ask your employer about the education program at work. You never know, you might just be able to learn from experts life the CFP professionals at Financial Finesse with no fear of bias or embarrassment.