A new study by Financial Finesse shows that women are still significantly behind men in their knowledge and confidence in many areas of finance, although the gap has narrowed since 2010.
Liz Davidson, CEO and founder of Financial Finesse, said in a press release these findings are disconcerting since women generally face more obstacles than men in meeting long-term goals and income needs in retirement.
“Women ... earn less on average than men, but have significantly longer retirements due to the fact that women live an average of five years longer than men. They also face higher health care costs throughout their lives. To overcome these obstacles, they should be saving more than men, and investing their savings more aggressively to get a strong long-term return that will sufficiently grow their portfolios. Instead, we see the opposite happening and this could put women in a dangerous position of not being able to meet their financial needs later in life.”
Key findings from the study include:
- The gender gap was most notable in investing and budgeting. Twenty-five percent of women reported feeling confident with how their investments were allocated compared to 42 percent of men, and only 63 percent of women said they had a handle on their cash flow versus 80 percent of men.
- The smallest gap was in retirement preparedness but both women and men are woefully unprepared. Only 12 percent of women and 19 percent of men are confident they will be able to replace 80 percent of their income in retirement.
- Women and men are participating equally in their employers’ 401(k) or retirement savings plans with 92 percent of women and 91 percent of men saving, yet women may be investing too conservatively to meet their income needs in retirement.
The good news, according to Davidson, is that there are signs that women are starting to educate themselves. In Q1 2011, the gender gap began to narrow across all demographic groups with women under 30 showing the most improvement.
Davidson also notes that women are twice as likely to use workplace financial education services as men, and that they are more likely to make changes as a result of the education they receive. In addition, there are numerous studies showing that when they are educated about finances, women actually tend to outperform men in their investing because they tend to trade less, incurring lower fees and taxes.
“This problem can be solved,” Davidson said. “But, like any societal problem, it won’t happen overnight, and it will require more resources to be made available to women in more schools, more community organizations, and at more companies. It will also require women themselves to change how they think about money. We’ve seen firsthand the impact of financial education on women and how well suited women are at taking an active financial role in their households. All the pieces of the puzzle are there. Now it’s just a matter of putting them together.”
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