How To Increase Financial Literacy and Manage Your Money With Confidence

This isn’t about what is or isn’t fair, but rather looking at the reality and ensuring women have the tools and knowledge to forge their own wealth. It’s time to stop depending on others, even our loved ones, to take the reins of our financial future. It’s imperative that individuals gain financial literacy and increase their confidence in managing and understand their money.

Women have every right to pursue wealth and leave a legacy for their children, grandchildren or charitable trust. The stereotype exists, but it’s time to stop living it.

Identifying the problem

Women face unsurmountable obstacles in the world. Gaps are persistent:

• Wage gap: It’s well known that women make 80 cents for every dollar a man makes, and that’s on the higher end.
• Debt gap: Women hold approximately two-thirds of the student loan debt and often pay more for mortgages, although women pay them back better.
• Pink tax: A Government Accountability Office report stated, “In all but five of the 35 product categories analyzed, products for female consumers were priced higher than those for male consumers.” Women often pay than men on similar items on anything from shampoo, razors and shave gel to mortgages and auto loans.
• Funding gap: Just 17 percent of the start-ups in the U.S. are founded by women. Even worse, 3 percent of all venture capital goes to female-led companies. Women also receive fewer small business loans.

Married women tend to take the lead when it comes to the short-term financial needs of the household, such as budget and bills, however, an alarming number of women, 82 percent according to a UBS survey, thought men know more about investing and financial planning. This isn’t a generational problem either — 59 percent of women age 20 to 34 defer investing and financial planning to spouses, according to a survey by UBS Group AG. In fact, younger women are far more likely to give the long-term financial planning to their spouses.

40-50 percent of marriages in the United States will likely end in divorce. Regardless of whether the divorce occurs in the fourth year or fortieth year, the husband has likely been the one making the financial decisions. This leaves women in a serious disadvantage for their long-term savings, especially if they’re used to their spouse managing the finances.

What about those that don’t end in divorce? The life expectancy of men is 76.4 years and, for women, it is 81.2 years. On average, women are living about five years longer in retirement. According to the American Community Survey Reports:

• About 2 out of 10 women aged 65 to 74 were widowed
• 4 out of 10 women aged 75 to 84 were widowed
• 7 out of 10 women aged 85 and older were widowed

These retirement years were likely planned out and invested over decades, and most likely, decisions were made by the husband.

If they are saving, women tend to prefer a savings account. Regardless of the reason, whether it’s lack of knowledge, hesitance on talking finances, fear of risk or any other reason, investing in a savings account means women are barely achieving anything more than a minimal interest rate when the money could be used for greater gains in an investment account.

It’s common knowledge that not only do women earn less than men but they also tend to put their careers on hold when it comes to raising children or caring for an elderly family member. Unfortunately, this reduces retirement income their social security as well as potential income that could go into savings.

Perhaps one of the worst instances of women not taking an equal interest in their financial future, is it impacts their freedom and independence. Without understanding finances, women can often get stuck in job they hate, a bad relationship or any potential toxic situation they wish they could escape.

Whether they are divorced, widowed or single, it is critical that women take control of their financial futures.

Taking control

Finances are scary. Not making the right choices feels like it could be a potential catastrophe. Taking an active role though, regardless if you’re married or single, will mean higher confidence and greater levels of clarity. Becoming financially literate won’t happen overnight, but the more you understand the more power you’ll have over your future.

First thing you should do is get a snapshot of your current finances. This will include accessing your online banking accounts and understanding your earnings and expenses. You can also dive deeper by discussing your medical and health insurance policies as well as your retirement policies with your current agent. Remember, this isn’t about making changes yet, but rather understanding what these expenses mean and how they will change.

Financial literacy doesn’t mean you need to become an expert either. It means understanding some basics. Where to begin though? If you haven’t been involved in the finances of your household, now is the time to start. Speak openly with your spouse or partner about the financial decisions taking place. It’s not always a matter of changing those decisions, but understanding how and why they are made.

Taking the lead of your financial future

If you want to leave a legacy or ensure you can leave something to you children, now is the time to start planning your financial future. It doesn’t matter if you’re a year out of college or a year from retiring, it’s important to have your money work for you as best it can.

If you’re not sure where to start, you can contact a trusted or your current family’s financial advisor. If you suddenly find yourself widowed, you’ll want to understand how your estate or trusts are structured. An advisor, along with your accountant, can review the current investment strategies and reposition them to better fit your tax burden, income needs and retirement. This may also include insurance policies which can be modified appropriately.

There are also plenty of mobile finance services by women that can help you make wiser and easier financial decisions. Also, take advantage of an employer-sponsored 401(k) or fund a traditional Roth IRA. Even if it’s a small percentage, it’s a start.

And, of course, have an open conversation with your spouse — the UBS report referenced earlier revealed a stunning statistic that when both partners participate equally in financial decision-making, 93 percent of the time fewer mistakes are made.

Finally, once you’ve gained some financial literacy and started taking your future into your own hands, one thing you can definitely leave your children, especially your daughters, is the financial education you’ve gained. And this can begin at any age.