Thrifty Thinking: Financial Literacy Gender Gap

I was recently alerted about a report regarding financial literacy's gender gap. I was curious about some reasons and some ways to close this gap, so I had a chance to interview Greg Ward on behalf of Financial Finesse.

Could you please define the "gender gap" as it applies to financial literacy?

 

The “gender gap” is based on the difference in the average percentage of positive responses received from men and women to a series of financial literacy questions.  These questions address cash and debt management, retirement preparedness, investment confidence, estate planning, insurance, taxes and college planning.  In general, a higher percentage of men responded positively to these questions than women, with the exception of retirement plan participation where men and women were at parity.  The report quantifies this gap by looking at nine key financial literacy questions that serve as a proxy for men and women’s overall financial literacy.

What are some contributing factors to this gender gap?

 

There may be several contributing factors, including how each gender processes information, how financial information is taught and delivered, social norms regarding the roles of men and women when it comes to managing finances, socio-economic challenges like single parenting, divorce, and income disparities, and others.

What are some of the results of having a gender gap?

 

Both genders are below what we would consider a comfortable level of financial literacy, but given the greater economic challenges faced by women, closing the gap and improving the financial literacy of women is important on a societal level.  Women, in general, live longer than men, receive lower average Social Security benefits, and earn less throughout their working career.  With the gender gap showing women are lagging behind men in having an emergency fund and having a handle on their cash flow, these short-term financial issues are a significant obstacle to reaching long-term financial goals such as retirement or buying a home of their own.  Other benefits to improvement include reducing dependency on government programs such as Social Security, Medicare, and Medicaid, as well as contributing to economic stability through better investing and fewer defaults on loans and mortgages.

How can women catch up to close the gender gap and become more financially literate?

 

Due to time out from the workforce and pay inequality, women actually should be saving MORE than their male counterparts to close the gender gap.  There are a number of resources available to help women improve their financial literacy, including books, associations (e.g. the Women’s Institute for a Secure Retirement (WISER)) and financial education through employer-sponsored programs.  For one woman’s perspective on the issue, check out http://www.forbes.com/sites/manishathakor/2011/01/18/financial-catfight-3-reasons-i-support-personal-finance-books-for-women/.