In this piece for the Wall Street Journal, journalist Lauren Silva Laughlin reports on the modern gender gap that exists today for many women around financial literacy.
At Rebalance, our firm is proud to be a female-majority team, and we pledge to tackle this gap and help empower women to take control of their financial future.
We are excited to announce the launch of a new webinar series aimed specifically towards this effort, so stay tuned.
Women’s Other Economic Gap: Financial Acumen
by Laura Silver Laughlin for The Wall Street Journal
A gender gap in financial literacy is holding many women back when it comes to taking the lead in their own financial planning.
As women become bigger contributors to household income, they have the opportunity to take a more prominent role in making family financial choices, but research suggests many aren’t yet stepping up to the plate. Part of the problem may be a lack of acumen, but fear and stereotypes don’t help.
There is no monopoly on lacking a knack for figures. According to a 2017 paper from the Global Financial Literacy Excellence Center, 77% of the world’s adult population lack an understanding of basic financial concepts. Women have less of an understanding than men, though.
A recent survey conducted by UBS found that only 23% of women globally take charge of long-term financial-planning decisions. And it isn’t a generational problem: 56% of women aged 20 to 34 defer to their spouse compared with 54% of women over 51 years of age. A report from the Financial Industry Regulatory Authority suggests that women’s financial understanding is going in the wrong direction, too. Baby boomer and Generation X women revealed higher levels of financial literacy than millennial women based on a five-question quiz.
While many married women are inclined to leave investing to their husbands, single women fall short, too. A financial-literacy gap exists between single men and single women, a 2014 academic paper by Dr. Tabea Bucher-Koenen, head of the ZEW Research Department, found. In the U.S., in particular, single women display very low levels of financial literacy in comparison with those in the Netherlands and Germany.
Women have good reasons to up their game. As women gain more undergraduate and advanced degrees than men, they are carrying more student debt, according to Merrill Lynch. Parents tend to cut off financial support to women much more quickly, too. Among those aged 30 and over, 62% of men still receive financial help from parents versus only 49% of women. Later in life, the consequences become more dire. UBS’s study found that 74% of widows and divorcées discovered negative financial surprises when they finally took control of their finances. A 2013 study based on Census Bureau figures estimates that 17% of all women aged 65 and over are living in poverty compared with approximately 12% of all older men.
Twice as many women as men in the U.S. have no money in the stock market, Merrill Lynch says, and 41% of young women versus 28% of men say their biggest fear isn’t market volatility but not knowing what they are doing. While nearly 91% of women say they trust their instincts when it comes to having children, only 56% trust them when it comes to investing.
Some women have started to take the figurative bull by the horns. Women now account for 46% of students enrolled for master’s degrees in business, according to the most recent data from the National Center for Education Statistics, compared with just 25% in 1980. Several organizations are working to get younger girls excited about math from an early age, including the National Girls Collaborative Project and Invest in Girls.
As more women take control, a business opportunity is arising for canny firms. Former Citigroup Chief Financial Officer Sallie Krawcheck recently founded Ellevest, an online tool that helps educate women and facilitate investments specifically for them. Fidelity has a website dedicated to women and investing, which includes a checklist and step-by-step processes for help. Goldman Sachs’s private wealth-management group has developed a women’s forum in 11 cities that aims to empower clients and prospects to play a meaningful role in managing their wealth.
According to Dr. Bucher-Koenen, women are much less likely to consult financial advisers to compensate for their lack of knowledge. Like glass ceilings in the workplace, the financial-literacy gap will take a conscious effort to overcome.
This article was originally published in The Wall Street Journal on September 2nd, 2019.