Financial Literacy: Changing the Game for Girls

This year on 8 March, the United Nations International Women’s Day has a strong call to action, and one that is particularly pertinent to our profession – “Invest in Women: Accelerate Progress”.

Since the World Economic Forum estimates that it will take 169 years at the current pace for women to achieve gender economic parity with men[1], accelerating progress is the only hope that women have of avoiding inequality for future generations.

To this end, the role of financial literacy for women cannot be underestimated

After a lifetime of working, according to the Wealth Equity Index, women worldwide are expected to accumulate only 74% of the wealth that men have (72% in Australia)[2].

The gender retirement income gap, another measure of inequality, is estimated to be 15% in Australia[3]. This is due to a complex set of societal factors[1,3], including:

  • the structure of retirement programs
  • unequal career trajectories between men and women
  • the gender pay gap
  • longevity risk and;
  • notably, lower financial literacy.

Financial literacy is crucial for women to maintain economic independence, have the courage to escape an abusive relationship, navigate the financial challenges of old age and, importantly, to be able to pass down these skills to the next generation of women.

Women may also face societal norms and expectations around family and career, and challenges in balancing work and family responsibilities. Financial literacy may help women balance and evaluate their own pathways to financial wellness and personal fulfilment.

Lack of financial literacy can impede a woman’s confidence and ability to take the steps needed to build wealth, such as investing in the stock market, for instance.

According to research from the Global Financial Literacy Excellence Center, women are much less likely to invest in the stock market, due to both a lack of financial literacy and a lack of confidence. According to their study, as much as one-third of the gender gap in financial literacy is due to confidence while the other two-thirds is due to knowledge. Interestingly, when women do invest, various studies have shown they tend to get better investment returns than men[4].

A 2022 report from the Melbourne Institute, based on the Household Income and Labour Dynamics in Australia Survey, indicates several concerning trends for financial literacy in Australia.

The survey revealed a considerable gender gap in financial literacy, which widened from 2016 to 2020. It also observed that there has been a decline in overall financial literacy over that period, with the greatest decline being in the 15 to 24 age group.

What can we do to help bridge this gap in confidence and knowledge?

There are many aspects to personal economic independence, and these differ between societies with varying value systems and in economies that have different income levels.

Early financial literacy is one piece of the jigsaw puzzle that can contribute to building both knowledge and confidence. In remarks to the Financial Literacy and Education Commission in 2021, US Secretary of the Treasury, Janet Yellen, highlighted that,

“Research does show that education – especially early education – about how to navigate personal finances can have a lasting, positive impact on people’s lives. It can be part of our strategy for building a more equitable economy.”

Ultimately, financial literacy is correlated to financial well-being[5].

So just how early should we be teaching children concepts about money?

In my podcast, Banking On Girls, which explores the importance of financial literacy for girls and young women, I spoke with Rebecca Maxcy, Director of the University of Chicago Financial Education Initiative.

Rebecca compares teaching financial literacy in high school to applying a band-aid to an injury[6]. While the pursuit of knowledge is certainly welcome at any age, in order to influence attitudes and behaviours, Rebecca’s work has led her to the conclusion that, when it comes to money, we need to start even younger than high school to have a greater impact.

A University of Cambridge study[7] similarly found that many behaviours, including certain money habits, are learned before the age of seven.

One of the most common concerns I hear from mothers of teens is the disconnect in their children’s minds between electronic payment methods and actual money.

As young adults, our children are faced with a barrage of circumstances that require a basic but sound knowledge of financial literacy to navigate, including student loan debt, credit card solicitations, and financial technology which is available at the touch of a screen.

Families play a vital role in influencing the evolution of children’s financial behaviours. My father was Australia’s first Asian actuary, and I grew up in a home where money and finances were openly discussed, providing me with many advantages for which I am grateful. One such advantage was the unwavering encouragement to become an actuary at a time when there were so few women in the profession.

Since launching my podcast, I have learned through the conversations I have had with women that many families do not talk openly about money, mistakenly fearing it will appear inappropriate or rude.

Conversations about money do not always have to be about the figures themselves, especially with younger children.

A simple example might be involving a child in a shopping trip. Preparing a shopping list can illustrate planning and prioritisation (executive function), and the concept of ‘wants’ versus ‘needs’ (positive financial habits). Comparing labels and prices can help develop decision-making skills[7].

Open dialogue within a family about money from a young age can be influential in forming positive financial behaviours in adulthood. Rebecca Maxcy’s latest project at the University of Chicago, for example, is developing a set of money conversation cards for families aimed at children five years old and above.

Children and youth develop in circumstances, in different ways and have different needs – a large part of parenting involves imparting human values and fostering individual talents and interests.

Within this, there is the opportunity to impart awareness of concepts that will develop financial capability and potentially spark a curiosity for further learning later in life.

With the challenges that current generations are facing – such as navigating fintech, easy access to debt, and the increasingly personalised responsibility for retirement outcomes – financial literacy for young women (and all people) is going to be more critical than ever.

Author’s note

The views in this article and in her podcast are the author’s own. 


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