Gender gap in financial literacy shrinks, work remains on retirement planning

Just like the gender gap in pay, there’s a gender gap in financial literacy, which includes knowledge of investing, retirement planning, saving, real estate, insurance and tax planning. Although the gap is narrowing, advisers can provide the educational tools needed — particularly in retirement preparedness — to catch women up to men.

The gender gap in financial literacy is gradually narrowing, in part because women are dealing with their finances more proactively and using financial wellness programs more often than men, according to a recent report from Financial Finesse, an El Segundo, Calif.-based provider of workplace financial wellness programs.  

One-third of women feel confident about their investment allocation, compared to one-half of men, and only 66% of women feel they have a general knowledge of investing, compared to 85% of men. Similarly, 63% of women said they have a handle on their cash flow, compared to 78% of men, and only 47% of women said they have an emergency fund, compared to 62% of men, according to Financial Finesse.

Liz Davidson, CEO of Financial Finesse, said, “Investing is by far the largest gap, and we need to change that because that is one of the primary ways that you grow wealth. The second largest gap is money management, and there’s a big saving component in there.”

The gender gap in financial literacy may contribute to the different levels of retirement preparedness between men and women, according to a 2010 study by Rand Corp.

The retirement savings challenge is even worse for women, given certain demographic and social trends in the United States.

“Women tend to live longer than men, have shorter work experiences, lower earnings and levels of pension or survivors’ benefits. These factors put women at a higher risk than men of having financial problems and of approaching retirement with little or no savings,” the Rand report explained.

Davidson confirmed, “[Women] have to save a greater percentage of their income, and they have to invest it more wisely, and they have to make it last longer because they live longer. That’s a whole lot of challenges. It’s a perfect storm in effect. That’s why this issue is so important, and it’s why movement in a positive direction is such a good thing. We’re only at the beginning stages of fully closing that gap. There’s a whole lot more that needs to be done.”

The gender gap “is not just a women’s issue. This is a societal issue. We all have mothers and sisters and daughters who are impacted by this,” Davidson added.

Fifty-seven percent of employers provide financial education to their employees, according to the Society for Human Resource Management, an Alexandria, Va.-based organization representing human resource professionals. At least 71% of employers offer some form of investment advice to their workers, and 43% offer advice specific to retirement preparation.

Employers provide this financial education because they know that financial stress can negatively impact job performance and the ability to focus on work.