Gender and the Lack of Financial Education: A Detriment to Economic Equality

December 14, 2016

Barbara Anthony is an Associate at the Harvard Kennedy School’s Center for Business and Government, Pioneer Institute’s Senior Fellow in Healthcare, and an Adjunct Professor of Law at Suffolk University Law School. Previously, she served as Massachusetts Undersecretary of Consumer Affairs and Business Regulation, Director of the Northeast Regional Office of the Federal Trade Commission, and Vice President and Chief Compliance Office for BayBanks.

When Massachusetts banned salary history from the interview process and a similar dialogue surged across the U.S., many of us rejoiced – our relentless battle for pay equity was making a dent in discriminatory practices. The law, which will come into effect in July 2018, is undoubtedly a momentous step forward toward wage equality. Assuming women achieve pay parity sometime before the century turns, a tricky assumption in and of itself, a complementary issue remains – are women financially savvy enough to navigate safely through the economic and financial challenges that surround our lives?  While many women are pretty well equipped to navigate these shoals—women make most household budget and healthcare spending decisions—many still lack the sophistication needed at every stage in the life cycle, particularly as women age. 

Research continually points to the fact that 80 to 90 percent of women will, at some point in their lives, be entirely responsible for managing their finances. Additionally, women are at significantly higher risk for poverty post-retirement. The National Institute for Retirement Security determined that women 65 years of age and above are 80 percent more likely to live in poverty when compared to men. And yet, one survey showed that over three-fourths of U.S. women are lacking in financial literacy, even concerning basic financial concepts. For example, in a 2014 survey conducted by the Global Financial Literacy Excellence Center, authors found that when prompting individuals with three basic financial questions 38 percent of men could answer all three questions correctly while only 22 percent of women could do the same. The results are exacerbated when controlling for under-35 populations, in which only 26 percent of men and 12 percent of women could properly respond to all three questions.

Fortunately, there are tangible measures we can take to enhance the financial literacy of women. While a 2009 U.S. survey on financial literacy determined that women are more likely to be unable to answer questions on basic financial concepts, women are also more likely to select “I don’t know” on these types of quizzes. This means that women tend to be aware of where our knowledge begins and ends and indicates that women are increasingly likely to implement lessons learned from financial education.  And the good news is that there are excellent opportunities in Massachusetts for women to enhance their financial literacy savviness.

I served as a chair on Treasurer Goldberg’s Financial Literacy Task Force, where we reported on financial health in Massachusetts and made recommendations to best serve various populations with financial education. As part of implementing these recommendations, the Treasurer supports Credit for Life Fairs where high school students practice financial decision making—finding a home, getting insurance, and covering emergency costs—after being assigned salaries and other life circumstances. Massachusetts veterans, service members, and their families can receive free programming on money management, college planning, and retirement savings through Operation Money Wise. And finally, the Treasurer works diligently on the financial wellbeing of women across the Commonwealth. She recently implemented the Women’s Economic Empowerment Series (WEES), a four session workshop focusing on wage negotiation, money management, retirement, and investment strategies for women of all ages, ethnicities, economic backgrounds, and levels of fiscal knowledge. Programs like this one are so very needed, for all women and especially women affected by domestic violence, incarceration, or language barriers.

The program, which will expand to more communities in 2017, reminds us that the gender gap in financial literacy can be equally as devastating as the wage gap and entirely destructive when the two are compounded.