Mary Quist-Newins, MBA, MSFS, CFP®, ChFC®, CLU®
Right now, women have more financial influence than any other time in history. With more women earning advanced degrees, becoming CEOs, and inheriting wealth from their parents, the proportion of financial capital controlled by women continues to grow every year. According to projections from the McKinsey consulting firm, American women are expected to control at least two-thirds of the nation’s wealth by 2030.
Yet despite these monumental advancements, financial literacy among women remains shockingly low. Data from a recent UBS study reveals that 54 percent of women aged 51 or older in the U.S. still leave important financial decision-making up to their husbands. Younger women are even more likely to take a back-seat role with 56 percent of women aged 20-34 deferring financial decisions to their spouse. This data suggests that although women are gaining control of more capital than ever before, financial literacy rates are not rising to meet their needs.
Why Financial Literacy Matters
Whether married, unmarried, or divorced, it is essential for women to develop their financial literacy—particularly given their increased risk of poverty after retirement. The average woman lives five years longer than men, earns 82 cents for every dollar a man earns, takes 12 years out of her working life to become a caregiver, and faces a 70 percent chance of requiring assisted care at some point during her life. Without a basic foundation of financial literacy, her inaction is inevitable and costly.
Given the devastating economic impacts of COVID-19, increasing financial literacy may be a key to financial recovery for vulnerable populations such as women and minorities. At the same time, finding objective sources of financial information may not be that easy. A 2013 study by the Consumer Financial Protection Bureau uncovered that for every dollar spent on providing financial education to people, a whopping $25 is spent on marketing financial products and services that do not always have the consumer’s interests at the forefront.
Financial literacy is a cornerstone of good financial decision-making. Without it, women are more likely to take a passive role that will leave their long-term planning vulnerable to the financial risks women disproportionately face.
Most Women Don’t Recognize Their Financial Illiteracy
Over my career as a practicing financial planner, I loved working with clients to help them gain greater clarity and control over their money. It was a true joy to partner with hundreds of highly smart, accomplished, and talented individuals. However, I was often struck by the lack of basic financial literacy among even the most intelligent people.
I believe the heart of the problem is that financial knowledge has not been presented in ways that are easily understood or personally meaningful. Making things worse, we are besieged by often meaningless, overwhelming, and sometimes downright damaging financial information.
As a professor and researcher, I came across study after study confirming that most Americans – including the well-educated, affluent, and financially successful — score poorly on financial questionnaires.
As a financial planning practitioner with three successful practices in three states spanning nearly three decades, I found the related dynamics. Many of my clients — both male and female — were highly educated, successful in their careers, and leaders in their fields. However, when it came to money, most of these high-performing women admitted that they didn’t feel they knew enough. “In the operating room, I’m confident,” one physician client told me, “but when it comes to money, I’m not.” Compounding this insecurity is the belief that financial planning largely revolves around math - which many still profess as avoiding. Another factor is that until recently, the role of financial planning largely fell to men. Combined, these factors contribute to the erroneous misconception that women were not as adept at financial planning as were men. In my experience, nothing could be further from the truth.
Fortunately, industry, academic and professional experience all support that women are generally adept at planning. I believe it’s in our very nature. Recent gender-based brain research also confirms that females, in general, think more holistically than do males. Both of these inherent strengths lend themselves well to the process and scope of financial planning. Growing your money smarts improves the quality of your financial planning decisions.
How Do You Score?
With that in mind and just for fun, take the FINRA Financial Literacy Quiz. Test your money smarts, then review detailed answers to see how you measure up. Compare your scores with others and see how Moneyweave® Academy can help you grow in your financial smarts, no matter where you are on your knowledge journey.