Mar 25, 2022 - Parker Timlin
Financial independence is a form of personal empowerment, but women face a number of barriers that make it more difficult to succeed in the financial world and participate equally.
According to BNY Mellon research only 28% of women, globally, feel confident about investing their money. Women invest less frequently due to lack of education & engagement of women's finances, the income gap, and the myth of investing being a high-risk activity. There would be an additional $3.22 trillion in assets under management from private persons today if women invested at the same rate as men, according to a figure that clearly supports financial literacy for women.
Women, specifically women of colour, consistently report less confidence in their finances and economic future than their male counterparts. According to a study by Fidelity only 14% of women reported that they know a lot about saving and investing. Financial literacy rates are linked to wealth growth, stock market involvement, and retirement planning and saving, so this is a concerning number.
Currently, 37% of women say that if investment jargon were simpler to understand, they would be more likely to invest or invest more than they do now. Improving women's financial literacy not only improves their economic standing but also provides the opportunity to support and invest in women-owned enterprises and entrepreneurs. It is a crucial step in the direction of gender equality.
According to the World Economic Forum's Global Gender Gap Report 2021, the wage discrepancy between men and women in equivalent positions is still at 37%, while the income gap is close to 51% (the ratio of women's total wage and non-wage income to men's total wage and non-wage income). Unfortunately, the COVID-19 pandemic has exacerbated wage, wealth, and power disparities, raising serious fears that decades of progress toward decreasing these gaps has been erased.
There is widespread misinformation that individuals require large amounts of disposable income to begin investing; which is not true. This links back to financial literacy/education reaching women and encouraging them to invest their money. Women worldwide are under the belief that they need $4,092 in disposable income per month (approximately $50,000 per year) before they can start investing some of their money. With increased financial education women could begin investing earlier increasing their wealth.
According to BNY Mellon research, women are deterred from investing due to misunderstandings about risk levels. According to the 2018 S&P Global survey, only 26% of American women invest in the stock market. Most studies indicate women tend to avoid equities with the majority having 68% of their investments in cash despite the potential for development in equities. With increased education and understanding of investing women could grow their wealth by putting money into stocks, which can be riskier but historically produce higher returns. To draw women into an investment discussion that is both fair and truthful, the industry must work to better communicate the risks and rewards of investments, particularly in the context of missing potential opportunities as a result of not investing.
Financial education has a huge impact according to a survey performed by the National Financial Educators Council; lack of financial literacy cost Americans a total of more than $352 billion in 2021. People who lack a fundamental comprehension of financial principles are ill-equipped to make financial management decisions. Financially literate individuals are able to better understand financial concepts including saving, investing, borrowing, and other financial matters.
The S&P'S Ratings Services Global Financial Literacy Survey found that there were lower rates of financial literacy among women and the poor as well as many users of financial products lack financial skills. Improving women's understanding of finance will improve their financial outcomes, such as investing, more effective saving, better debt management, and retirement planning, according to research. In addition, disparities in financial literacy aggravate wealth disparity, which early interventions may assist to mitigate.
Start teaching women about money and investing earlier. The Invest in Girls' program from the Council for Economic Education has focused on ushering in the first generation of financially literate girls and aims to change the way girls interact with money. Educating women at a younger age will give them a terrific foundation of knowledge to go into the world with and help them too actively participate in growing their wealth.
The Women's Institute for Financial Education is the world's oldest non-profit organization dedicated to helping women achieve financial independence through financial education. Their programs teach women of all ages how to manage their money, start investing, and prepare for their futures. With this kind of access to education, it will make investing more accessible to women entails providing everyone with the knowledge, skills, and drive to participate in the market.
We can achieve a more inclusive investment landscape for the benefit of all if we all work together and improve access to financial education. On top of everyone's personal roles in financial literacy, it's important to expose children both male and female to financial education so they can gain financial independence earlier and avoid poor financial decision-making. Financial advisers play a key role by demonstrating to their female customers and prospects the financial ramifications of various decisions, as well as ensuring that the language they use and how they interact with consumers is altered to make it easier to understand.