Across the board, in all countries, women own fewer savings accounts than men. Holding constant all the economic and sociological reasons for these differences, the point it is that even in developed countries women still struggle with the topic of finance. Whether they are entrepreneurs (investing in the least capital intensive businesses), workers (who earn only 77% of what their male counterparts earn) or whether they are stay at home moms (unpaid work). At all levels women are not on par with men when it comes to finances.
Here are the top four reasons why all this matters and why we need to bring more light and discussion to this area.
No. 1 Women are still the primary caregivers in the family
Both parents play an important role in shaping the outlook of a child. However, it is the mother who has the greatest influence on a child. The children that they raise are the future workers and consumers of tomorrow. The morals, values and life skills that they impart to their children will be reflected in society. Let’s face it, we all brainwash our children from the time they are born, just like we were brainwashed when we were born. Children come into this world as a blank slate “tablua rasa”. From the time they enter the world they are bombarded with everything in their environment and they learn consciously and unconsciously. Whatever behavioural traits children assimilate at home it will stay with them for the rest of their lives. In a 2009 study by the National Endowment for Financial Education, it was found that “direct teaching from parents is more influential on the financial habits of young adults than work experience or high school financial literacy courses.” This means that means that if you are a financially savvy parent, chances are so will to will your children be. The converse of this is true. So the onus is on the primary caregiver, the mother, to be financially literate, so as to ensure that their children have the right skills and knowledge needed to navigate the world when he/she leaves the nest.
No. 2 Women are usually in charge of the day to day expenses of living
In the words of the executive director and founder of the Institute for Financial Literacy “Mothers have traditionally adopted the role of managing the day-to-day finances, such as paying bills, buying groceries and shopping for clothes.” As such women need to ensure that they have core financial skills at their fingertips. Having good budgeting skills is crucial to the financial survival of the family. It is the day to day finances that make or break households not the major purchases. It is important to monitor everyday finances and use money effectively to avoid “leaks” that really hurt over time.
No. 3 Women have to break the stereotype
The best place to break stereotypes is at home! Too often in my practice, I see brilliant women shy away from dealing with their finances. They succumb to the myth that men are better at math and finance. The actual research in this area shows the opposite. There are numerous studies which show that women make better investors than men because of their gender difference. Women are better with money because they are more risk averse and as a result tend to take on less debt. Women are also less arrogant than men when it comes to investing. They will seek advice and ask for assistance when necessary. Men have the affliction of overconfidence and it leads to excessive trading that hurts their portfolio performance as noted in the study Boys Will Be Boys: Gender, Overconfidence and Common Stock Investment.
Children, boy or girl will benefit tremendously from a mother who is financially knowledgeable. The Mom is a role model for both genders. Girls will get the message that they are very capable of managing money. While the boys may even pick up some of the Mom’s management skills and take it as the norm that women are capable of managing money. In either case, when the mother is financially literate the stereotype starts to crumble.
No. 4 Women get divorced and they live longer
The OECD, along with several other studies, have shown that women tend to have lower levels of financial literacy both in developed and developing countries. This is not good. Women NEED to understand and know how their finances work. First of all, divorce rates are high, 40-46% of marriages in North America end in divorce. This is a reality that women need to be prepared for. When a woman leaves all the financial matters of the household to the husband, it often leads to unfair and complicated consequences for her in the case of divorce and death. Prenuptial are important, especially if the woman entering the marriage has a high net worth. I tell all my single and affluent female clients “when you get the ring, be sure to give me a ring”. As an advisor, I play devil’s advocate and take care of the practical side of the romance, i.e. the finances.
When I advise older couples I make it a priority to educate the wife if she is in the dark. Usually there is a generational tendency not to be concerned and don’t want to bother with all the details. My job is to ensure that she gets a general understanding of how the family finances are structured. She doesn’t need to know all the specifics, but she should have an idea of where things are, why and how it affects her. The initial resistance disappears when she realizes that it is not as intimidating or complicated as she first thought it was.
Money management is a life skill that everyone requires regardless their gender. It is important that misconceptions and perceived limitations are addressed and mitigated because to leave the status quo as is, will continue to do more harm than good. Women need to stop being marginalized when it comes to money and start taking their rightful place at the helm.