Women and the Financial Literacy Gap

The gender gap exists in financial knowledge, too. Here’s why.

Around the world, women lag behind men in financial literacy. And this disparity has far-reaching implications—financial knowledge means better financial decisions, better financial decisions means greater financial success, greater financial success means greater benefits across a range of life metrics.

Based on data and research over the past five years, we now have a better understanding of the roots of this gap, as well as more informed solutions to ensure the financial empowerment of women.

Where Women Stand

In a 2013 paper, social psychologist Gary R. Mottola found that women consistently scored lower than men in financial literacy concepts. He noted that this differential presented the likelihood of consequences for equity in a number of areas critical for financial health. He wrote:

“[The] gender-based gap may negatively impact the financial well-being of women…[since] financial literacy has been linked to a number of important outcomes, including wealth accumulation, stock market participation, and retirement planning.”

He also noted that cost of credit could be analyzed along gender lines, as women “tend to have lower ‘debt literacy’ levels than men and engage in more high-cost methods of borrowing—such as using payday lenders, pawn shops, and rent-to-own stores.”

In fact, 32 percent of American women (versus 29 percent of men) with low financial literacy are likely to engage in negative credit card behaviors, according to the OECD.

What’s more, many women affected by the financial literacy gender gap may be ashamed of their lack of a financial education or of their dire financial situation. As a result, these women are reluctant to seek help or educational resources.

Progress is being made, however, according to the FINRA Investor Education Foundation’s National Financial Capability Study. Data on financial capability, a concept composed of knowledge, resources, access, and habits, showed improving gender differences in financial knowledge.

Results from a five-question financial literacy quiz found that although baby boomer and Generation X women have higher levels of financial literacy than millennial women, the financial literacy gender gap is closing in subsequent generations. For baby boomers, the gap between women and men was 19 percent. For Gen X, the gap was 18 percent. For millennials, the gap narrows to 10 percent.

Why Does a Financial Education Gender Gap Exist?

The work of Claudia Goldin, a Henry Lee Professor of Economics at Harvard University and the director of the Development of the American Economy program at the NBER, indicates a basis for the current gender gap. Goldin’s articles on women’s employment and the gender gap suggest that disparities began with a greater shift from women as non-workers to economic contributors alongside men.

Looking back nearly a century ago, the 1920s were a period of vigorous economic growth in the United States. Not only is it considered the first modern decade with substantial economic developments, but it also saw both an improvement in women’s job opportunities and an increase in labor force participation that would continue to steadily rise.

In the 1920s, most American women did not hold jobs outside of the home, and those who did were typically young and unmarried. Only 20 percent of women were considered “gainful workers,” according to the US Census Bureau’s categorization of labor, although it’s important to note that historically, women’s contributions to the economy have been understated and undervalued beyond childrearing and housekeeping. It’s also important to bear in mind that of these “gainful workers,” African American women were twice as likely to participate in labor as were white women, at the time.

Women were not only kept out of the American workforce, but out of financial decisions and wealth management in their own families. It was not unusual for young women to hear the message that money was a man’s responsibility.

By 1970, after momentous social, political, and educational strides, about 45 percent of all women, both single and unmarried, were participating in the workforce as “gainful workers.” Additionally, it wasn’t until 1982 that American women surpassed men in the number of bachelor’s degrees conferred. Today, women’s participation in the labor force accounts for 57 percent of the total U.S. population.

Considering that it has taken nearly a century for women to integrate into the nation’s workforce and earn incomes separate from men, in addition to a struggle for adequate representation in higher learning, it’s not hard to understand why women’s financial education, and thus literacy, has also trailed behind.

Now that women increasingly have their own finances to manage, a timely discussion is needed about reevaluating the societal and generational messages passed down about women and money.

Why Is It Important to Close the Gap?

As women become leaders across the world, it’s important to ensure that they have access to a robust and meaningful financial education. Other than the fact that women deserve equal treatment to their male counterparts, here are seven reasons why we should close the financial literacy gap between the genders.

1. Closes Other Gaps

It has been more than 50 years since Congress passed the Equal Pay Act, which mandates that men and women receive equal pay for equal work, and yet pay disparities persist. In the midst of renewed media attention, some states have revised their pay equity laws to include further protections for women, including California, New York, Maryland, and Massachusetts.

With an understanding of how to manage personal finances, women are better able to make informed education and economic decisions over the course of their lives, ultimately helping to reduce the pay disparity among other gaps. An understanding of the return on investment (ROI) of a degree and its potential lifetime earnings increase tends to encourage women to pursue post-secondary education. Further, women invested in the national and global economy have a greater stake in political and social movements, as well as being able to financially back charitable causes.

The median household income in the United States is $61,372, according to 2017 data from the U.S. Census. However, that number doesn’t provide an accurate picture for everyone, since earnings fluctuate depending on factors like race, age, and gender.

American women earn a median income in every age bracket that is far below the nation’s average. For our purposes, we’re going to focus on the gender difference, inclusive of all races, by age. According to data from the Bureau of Labor Statistics for 2018, here are the median incomes that American women are earning in each age bracket:

  • 16 to 19 years: $424 weekly/$22,048 annually
  • 20 to 24 years: $523 weekly/$27,196 annually
  • 25 to 34 years: $738 weekly/$38,376 annually
  • 35 to 44 years: $866 weekly/$45,032 annually
  • 45 to 54 years: $854 weekly/$44,408 annually
  • 55 to 64 years: $856 weekly/$44,512 annually
  • 65 years and over: $925 weekly/$48,100 annually

On average, a woman today earns between 80 to 82 cents for every dollar a man earns, or $9,308 less annually. Over a lifetime, this adds up to $456,092.

2. Financial Independence

Financial literacy is the key to every woman’s financial stability later on in life.

A persistent stigma in the U.S. influences the perception that women are bad with money due to their gender, rather than a lack of financial education resources. Look no further than pop culture to reveal the unfavorable characterization of women as ‘shopaholics,’ ‘gold diggers,’ and ‘avo-toast buying millennials’. Such depictions lead to misconceptions that women must fall on the spectrum of overindulgent non-budgeter or money-hungry scammer; deferring to their fathers, brothers, or husbands when it comes to managing their personal finances.

Amanda Steinberg, the founder and CEO of financial advice website DailyWorth, noted that the issue also lies in how women have been shaped to view their own relationships to money.

“As women, we’ve been socialized to think we’re bad with money, or that engaging with money is somehow ‘unfeminine,’” Steinberg told Forbes. “It’s ironic that a gender typically so concerned with health, wellness and family security would also be averse to understanding the fundamentals of investing.”

Many women weren’t taught to be financially literate in childhood, a pivotal time for learning financial concepts that inform later decisions in adulthood. While many have a basic relationship to money on a day-to-day basis, it’s a deeper understanding of personal finance that’s lacking. Financial literacy isn’t about chance. Rather, it’s an intentional learning of the knowledge and skills necessary for a lifetime of managing financial resources.

In the same article as Steinberg, Carrie Birgbauer, the founder of NY Money Coach, noted a disconnect between an understanding of financial topics and the type of knowledge that translates into financial literacy.

“Even though many women can understand the headlines of financial news and talk stocks at a dinner party,” she said, “they’re really not fluent on these topics, and they feel uneducated, disempowered and in a complete fog.”

Women stuck in this fog become afraid of disrupting the status quo by seeking resources, as they become further engrained in financial illiteracy. A financial education to facilitate financial independence is the only way forward to making notable social change.

3. Women Live Longer

Financially independent women are secure making financial decisions without depending on a male figure in their lives.

In the wake of rising divorce rates and widowhood, which leads to poverty through poor planning, this is an important conversation to be had. Particularly since women have unique financial education needs, owing to their tendency “to live longer and earn less than men, therefore being more likely to face financial hardship in old age.”

The average life expectancy for Americans, according to the CDC’s National Center for Health Statistics, is 78.7 years, with women living longer than men by five years. The average age of widowhood is 55, with three out of four women widowed by the age of 56. The average age of couples going through their first divorce is 30 years old.

Adding to that, women are also more likely to be single parents and primary caregivers to relatives and friends, have lower median wages and lifetime earnings, and are less likely to be covered by pension plans and other retirement benefits.

4. Planning for Retirement

Between the pay disparity, unpaid family caretaking, greater longevity, and reduced retirement benefits, the average American woman is at risk when it comes to retirement. It’s no wonder then that more women than men tend to be worried about retirement.

According to findings from the 2017 Retirement Income Literacy Gender Differences Report, 80 percent of older women failed a retirement income literacy quiz. The quiz featured 38 questions covering the topic of managing retirement funds.

The study found that there existed substantial differences in literacy rates, noting the divide between men and women.

“The results of this study reveal that women continue to require more financial education and increased planning…. Our research shows that women do not adequately understand many of the retirement issues they face, which can lead to poor and improper retirement planning,” said Jocelyn Wright, the State Farm Chair in Women and Financial Services and Assistant Professor of Women’s Studies at The American College of Financial Services.

In order to mediate this gender divide in retirement planning, older women should meet with a financial advisor. Advisors are instrumental in helping people assess their current financial situation and better plan for the future. They may be paid a flat fee or an annual fee based on a percentage of the total assets managed.

5. It’s Women’s Money

Women are making inroads among the rich in the United States as the gender wealth gap is narrowing.

About 51 percent of American wealth is controlled by women. The number of wealthy women is growing twice as quickly as the number of wealthy men. By some estimates, women will control as much as two-thirds of the nation’s wealth by 2030.

Globally, there are more wealthy or high-earning women than ever before. According to Forbes, out of 2,208 billionaires, 243 of them are women.

On the downside, wealth and income inequality in the U.S. is at an all-time high. Large segments of society continue to face financial difficulties, perpetuated by disparities and the overall growing wealth gap. We can’t ignore impoverished women who inhabit other intersections along race, class, and education lines.

To get a complete picture, it is necessary to understand the actual median household income of a majority of Americans as opposed to the mean statistic. For women, $38,525 is the median annual income over a lifetime. When compared to the wealth accumulation of a minute portion of the population, this figure is distressing.

6. Empowerment and Representation

What would the world look like with women controlling the pursestrings?

Women who are financially empowered are able to back the causes they believe in with monetary support. Financially literate women tend to pursue higher education which leads to a greater representation of women in politics, education, business, and STEM fields.

According to the OECD, “[f]inancial education can contribute to improving women’s access to and use of economic and financial opportunities.” Further, empowered women are those who are able to assess risks, protect themselves, plan for the future, but most importantly take advantage of income-generating opportunities.

Ultimately, financial education contributes to a greater participation by women in economic activities that benefit the country’s overall economic growth.

7. Pave the Way for Future Generations

Not only should women strive to inspire the future women leaders around the globe, but to actively advocate for increased education and opportunity for young women and girls.

Fortunately, girls are ready to be independent and financially empowered, according to a 2013 report issued by the Girl Scout Research Institute. The nationwide survey polled 1,000 girls between the ages of eight and seventeen as well as their parents.

“Girls are extremely optimistic about their future lives but admit to lacking the financial confidence and knowledge to achieve their dreams,” the report found. “They are also coming of age in a changing landscape—many distrust large financial institutions and think that debt is a normal part of life.”

Research found that although girls have lower financial literacy and confidence than boys, they see few gender barriers. Moreover, girls have high expectations for their future finances and envision family structures in which they are engaged and contributing to financial decision making and planning.

Key takeaways from the study:

  • Ninety-four percent of girls would rather earn their own many than rely on parents, and 80 percent would rather earn their own money than marry someone for financial support.
  • Seven in 10 girls (73 percent) said that both men and women are equally likely to be financially responsible.
  • Nearly eight in 10 girls (77 percent) said that both men and women are equally likely to run a successful business.
  • The 13 percent of girls who believed that men are better than women with money mirrored the 13 percent of parents who held the same beliefs.
  • 86 percent of of girls said that both household partners should make financial decisions for the family and 81 percent said that both men and women should manage family finances. Three out of four girls (74 percent) also said that both partners should be responsible for raising children and financially supporting the family.
  • 85 percent of girls said they learned about money and finances primarily from their mothers; 61 percent said from their fathers; and 20 percent said from teachers or guidance counselors.
  • 83 percent of mothers considered themselves to be financially confident versus 92 percent of fathers.

What Can Adults Do to Help Young Girls Become Financially Literate?

Adults—namely parents, teachers, and mentors—should support girls with opportunities to develop skills in money management. Since financial literacy is learned at home, involve your daughters in the family’s day-to-day financial activities and shared decision-making. Avoid negative stereotypes about girls, women, and money, choosing instead to uplift financial role models to impressionable young girls.

Women-Focused Financial Education Nonprofits

One of the main challenges facing financial literacy organizations today is how to bridge the various gaps found along racial, educational, generational, gender, and wealth lines. Here’s how two nonprofits are focused on elevating women’s financial literacy through comprehensive financial education and consulting services.


The Women’s Institute for Financial Education (WIFE), is the oldest non-profit organization dedicated to providing a financial education to women seeking financial independence.

Co-founders Candace Bahr and Ginita Wall share a passion for helping women connect with the financial resources they need to assist them in every aspect of life. The motto, “We’ve said it before and we’ll say it again: A Man is NOT a Financial Plan®,” sits prominently on their website.

Created to empower women to financially plan for a life on their own terms, WIFE has assisted women through counseling about taxes, family, marriage, divorce, retirement, and estate planning for 25 years.

Savvy Ladies

Savvy Ladies is a nonprofit organization that provides financial education resources at no cost. The nonprofit’s goal is to facilitate financial independence by preparing women to make informed decisions about money.

Where Do We Go from Here?

Both women and men need to be sufficiently financially literate in order to positively participate in economic activities and make appropriate financial decisions for themselves and their families. However, women typically have less financial knowledge and less access to financial resources than men. Therefore, women have specific additional financial education needs.

The OECD developed global policy guidelines on how to empower women and girls with a financial education.

National strategies for financial education should identify gender disparities as part of broader initiatives to increase financial literacy among the total population. These approaches should also be implemented in coordination with relevant national and local policies that aim to address gender inequality.

This is necessary given that, as OECD notes, 1) “women face unequal access to economic opportunities and unequal outcomes with respect to men, including lower access to higher education, lower employment, lower earnings, and lower access to entrepreneurship and to finance,” and, 2) “women’s financial knowledge and confidence is generally lower than men’s and their financial needs and competencies are different in many instances.”

Identifying women’s and girls’ needs through research

Research at a national level should be conducted to evidence the financial literacy needs of the population by gender. Attention should be given to common needs and gaps that include the following:

  • Knowledge, confidence, and interest in financial matters.
  • Financial strategies to make ends meet and secure a financial future.
  • Access to and use of formal financial services.
  • Ability to choose between financial products and to access and use trusted financial information sources.

During this phase of research, it should also be taken into account that there are barriers that prevent women from accessing financial education. Due to differing national and local circumstances, it may be necessary to review the following:

  • Legal and/or social norms.
  • Gender differences in access to education, employment, and financial markets.
  • Gender differences in participation of employment and entrepreneurship.
  • Cultural, social, and economic factors that hinder women’s ability to learn and enact financial knowledge independently.

Identifying and prioritizing subgroups among women and girls

Depending on national or local circumstances, the strategies for financial education should seek to address external situations and recognize at-risk subgroups of women.

Situations where women likely face worse financial outcomes than men include higher levels of financial exclusion, over-indebtedness, and lower retirement rates.

Certain subgroups of women are often the most in need of improved financial literacy and should be the targets of these initiatives. Subgroups include young women, elderly and widowed women, women without an education or living on a low income, migrant women, and women at the intersection of minority and/or other at-risk statuses. Additional attention should be paid to differences in age, mortality rates, marital status, and education/literacy rates.

Involving key stakeholders

Public, private, and civil bodies dedicated to financial education should be involved with implementing policies, programs, and resources based on relevant research.

These stakeholders may include women’s rights and empowerment groups at the local, national or international level. NGOs and associations, corporations and employees in the financial industry, and educators and policymakers are key players to effecting change.

What do you think? What steps would help reduce the gender gap in financial literacy? Tweet to us at @OppUniversity and let us know!

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