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March 2, 2021

Women and Financial Literacy

Financial literacy means knowing how to manage your money and financial obligations. This means learning how to budget, pay your bills, save an appropriate percentage of income, and how and why to invest and plan for retirement.

It sounds like a lot, it can often be a difficult task for beginners who feel burdened by managing money on top of all of their other priorities and responsibilities in life. Women, who usually pick up a disproportionate amount of daily tasks in a household and struggle with earning the same as their male counterparts, can often feel like saving and investing is too much work to bring into the mix.

However, our finances dictate many other areas of our life: where or if we choose to access higher education, what we do in retirement, how we care for family members, if we choose to leave our jobs to start a business, and more. Taking the initiative to educate ourselves on (seemingly complex) financial knowledge can help us achieve major life milestones and make major decisions.

How Women Struggle with Financial Literacy

Low financial literacy rates for women can add up to hundreds of thousands of dollars over time. From the easily quantifiable (late-payment fees, interest payments, markups on feminine products) to the less quantifiable but equally sinister (lost opportunities for salary negotiations, taking years off to take care of family members), the financial world is stacked against women.

The chart below shows how the impact of being financially illiterate snowballs over the course of women’s lives and careers:


According to a 2018 Federal Reserve survey, women, on average, are less comfortable making retirement investment decisions, and they exhibit lower levels of financial literacy compared to men. Just 32% of women with a bachelor’s degree are comfortable managing their own investments.

When it comes to work, women are paid less on average, making about 20 percent less than men working full time. Women’s median weekly earnings for full-time work were $770 in 2017. For men, that number was $941. Women are also much more likely to work part-time than men.

This trend does not change as people get older. An American College of Financial Services literacy study of men and women between 60 and 75 found:

Those who passed were more likely to have a retirement plan, as well as a plan to cover the costs of long-term care.

Why Is It Important to Close the Financial Literacy Gap?

We’re still not where we need to be

It has been more than 50 years since Congress passed the Equal Pay Act, with a mandate that men and women receive equal pay for equal work. However, disparities continue to exist  – and in fact, have grown during the pandemic. According to a recent UN report, it will not be until the year 2277 that women, on average, can expect equal pay for work of equal value on a global level.

When women are able to access the same resources and knowledge of how to manage personal finances as men, they are able to make more informed and better economic decisions over the course of their lives and ultimately help close the wage gap. An understanding of, for example, how to best pay for an undergraduate or graduate degree, would encourage women to access higher education and get a return on investment for their efforts.

Financial Independence

Financial Independence is defined as having enough income to pay one’s living expenses without having to be dependent on others. Financial literacy is the key to women having (or working towards) financial independence.

There are, unfortunately, many stereotypes about women and money in the United States. Some women internalize these harmful messages about money, sometimes willingly giving up their financial independence and deferring to their fathers, brothers, or husbands when it comes to managing their personal finances. A persistent stigma in society is that women are bad with money due to their gender, rather than a lack of financial education resources. Women are characterized as ‘shopaholics,’ or ‘gold diggers,’ or are lumped in with the avocado-toast generation.

Every beginner makes mistakes when they’re just starting to manage their own money. Whether it’s parking cash into a checking account rather than investing the money, not signing up for a company contribution match, or being charged an overdraft fee – it happens. Harmful stereotypes prevent women from learning about money or being too hard on themselves if they make a mistake. Financial literacy comes with time and practice, which is why it’s important that women are free to make decisions about their own money and work towards financial independence.

Women are often blindsided by the financial realities of widowhood and divorce

A man will on average live to 84.3 compared to a woman’s 86.6-year lifespan, according to the Social Security Administration. With women having longer lifespans, the amount of savings needed for retirement grows.

Single and married women tend to focus on priorities other than retirement, like paying for their children’s needs and owning a house. This is not to say that they are spendthrifts or careless with money, just that they sometimes prioritize other people over themselves. Adding to that, women are also more likely to be single parents and primary caregivers to relatives and friends, have lower median wages and lifetime earnings, and are less likely to be covered by pension plans and other retirement benefits.

As a result of rising divorce rates and widowhood, women are sometimes financially unprepared when thrust in either of those two scenarios. This is why financial literacy is so important – it helps women take care of themselves financially in less than ideal circumstances.

How Women Can Increase Financial Literacy

A lot of the reasons why women have lower rates of financial literacy are unfortunately caused by systemic policies and the constant messages fed to women about money. Nonetheless, there are steps women can take to change their financial trajectory and become more financially independent:

Every adult has access to a free annual credit report at, which is authorized by federal law as the official site for free annual credit reports

Even if you have little to no income, it’s important to keep an eye on your cash inflows and outflows. Get in the habit of tracking and monitoring your expenses, and schedule some time with yourself or your family to go over your finances on a monthly budget. Even if you’re currently a student, work part time, or are a stay-at-home parent, having a budget will help you work towards your long term financial goals.

It is extremely easy to open a bank account digitally now. With a few clicks, you can set up both a checking and a savings account if you don’t already have one. Now you can also set up automatic transfers from your checking account to a high-yield savings account and earn some interest on your cash

Try not to depend on your credit card for discretionary purchases, or have a plan for paying off the credit card bill in full every month

We’ve written extensively on easy tools for beginner investors in the past. Consider signing up for an investment platform and making contributions when you can – the stock market has gone up 10% on average year after year. And the longer you keep your investments in the market, the more time they have to compound and grow. Here’s a guide to the financial ‘checkpoints’ you can work towards at each stage of your life.

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