WOMEN ARE LESS FINANCIALLY LITERATE THAN MEN – MORE THAN 41% OF THE FEMALE POPULATION STRUGGLES FINANCIALLY
With rapidly changing financial markets and increasing personal responsibilities – In particular for retirement income—being able to make informed financial decisions has become of paramount importance. Yet, empirical research from various countries shows that many people know little about the concepts underlying saving and investment decisions. This may have substantial consequences for financial well-being, especially as it relates to the accumulation of retirement wealth.
According to Wiser & Wealthy, a site dedicated to decreasing the financial literacy gap and promoting financial security for women, says that financial literacy is severe among women.
The Gender Gap In Financial Literacy
Not only is financial illiteracy widespread, but it is particularly severe among women. This is important because women tend to live longer than men; thus their savings needs are different. Women are likely to spend at least part of their retirement in widowhood. Evidence from the United States suggests that the death of a spouse is an important determinant of female old- age poverty.
Moreover, women tend to have less attachment to the labor market, with interrupted careers because of childbearing and potentially fewer financial resources over the life cycle. With fewer available resources and higher life expectancies, women’s financial security after retirement is potentially at risk.
According to a Wall Street Journal article – Women, Especially, Are Failing Financial Literacy The even worse news: Men apparently don’t know much about the topic in the first place.The authors surveyed people in the U.S., Germany and the Netherlands.
“Both young and old women show low levels of financial literacy,” according to a report by the Global Financial Literacy Excellence Center. “Even women in favorable economic conditions are less financially knowledgeable than men,” says the report, titled “How Financially Literate Are Women?”In the U.S., only 38% of men got all three questions right. The American women did even worse, with only 22% scoring three out of three. The other countries showed a similar pattern.
They are large gender differences in financial literacy in the United States, Germany, and the Netherlands. Not only are female respondents less likely to answer financial literacy questions correctly but they are also more likely to state that they do not know the answers to the questions. Gender gaps are large and strikingly similar across countries. The gender gap in financial literacy continues to persist even after taking into account marital status, education, income, and other socioeconomic characteristics. Moreover, we find a gender gap in financial literacy even among the young—this in spite of younger women having higher education levels and labor force participation. We also find that women are not likely to consult financial advisors to compensate for their lack of knowledge. Other studies using different measures of financial literacy confirm our findings. There is a persistent gender gap in financial literacy that is independent of the socio-economic background, cultural and institutional context, and the measure of financial literacy used.
Gender differences occur not only in objective measures of financial literacy but also in self- reported financial literacy measures. When asked to assess their financial knowledge, women tend to give themselves lower scores than men.
Studies show that financial literacy can be linked to behavior: Those who are more financially literate are more likely to plan for retirement, to invest in the stock market and pay attention to fees, and to borrow at low costs. Financial literacy can also be linked to greater financial well-being, where the term financial well-being is used to broadly measure the financial situation of a household, for example, having resources to shield against shocks and to achieve financial security.
How To Overcome Lack Of Financial Knowledge
One way to overcome lack of financial knowledge is to seek financial advice. If women recognize their lack of knowledge, one way to potentially compensate for lack of knowledge would be to rely on professional financial advisors when making financial decisions. However, several studies show that women are much less likely to ask for advice and are less likely to use online resources as a source of information.
Utilize free resources online and through local financial programs. Check out the following websites to get budget, divorce, savings help and more:
- The Financial Women’s Association aids women and high school students by building basic banking, budgeting and borrowing skills. Established in 1956, the group of now over 850 members worldwide helps women advance their careers and become leaders.
- The Women’s Institute for Financial Education is a non-profit organization which began in 1988 and provides guidelines on cost of living, retirement planning, taxes, divorce, widowhood.
- Women’s Institute for a Secure Retirement (WISER), a nonprofit organization dedicated to increasing long-term financial welfare for women, with a focus on retirement security. The group developed the National Resource Center on Women and Retirement Planning, which has a collection of free resources for basic financial planning. Site visitors can take advantage of guidance regarding divorce planning, estate planning, home ownership and caregiving information.
- The Financial Literacy Organization for Women and Girls (FLOW) is a charitable organization dedicated to empowering females of all ages to achieve their financial best. It hosts conferences, seminars, workshops and boot camps to assist women in financial independence.
Always join us back here at Wiser & Wealthy. Our passion in enabling women to learn and become financially independent.
Visit WiserandWealthy.com to learn more about financial literacy and improving your wealth.