With a whole fresh year of spending in front of us and holiday expenditures “safely” behind us, my first column of 2012 is about money. Not how much you have or don't or wish you did, but stressing the importance of financial literacy. Financial literacy is the ability to understand finance. A necessary component to becoming financially self-sufficient. Examples might include an understanding of savings, interest, investment products, assets, liabilities, basic household economics and accounting, balancing a checkbook, opening a bank account. And while it’s certainly important for everyone, since I write primarily for women (but do love my male readers ), I’m starting with the importance for you.
And ladies, we do have to do something because according to “the research”, women are severely lacking in financial aptitude. The International Federation of University Women (IFUW) recognizes financial literacy as an essential life-skill that is every human being’s basic right. Yet many women don’t know the first thing about money management, investing or how to read a basic financial statement. So, despite being considered the “chief purchasing officers” of our households by those interested in our spending patterns, most women are way far behind on understanding how that same household spending impacts a household budget or their overall financial strategy. Yes, that does implies you should have a financial strategy.
See, this is more than just whether or not we were good at math in high school! (girls and math is another whole column all together). This is about understanding fundamental finance and therefore being able to make prudent financial choices. While more women today are taking charge of their financial future by returning to work or goig for the promotion, many leave key money management functions to the men in their lives or worse, ignore it altogether. If you ask me, far too many women stay on the sidelines and don’t actively manage (or even participate in) their financial future. This could lead to trouble down the road. Not saying there will be trouble but there could be.
It's a common theme among many women. "The single biggest mistake I see women make is that they acquiesce [the financial decision making] to their spouses," says Stewart Welch, author of "The Ten Minute Guide to Personal Finance for Newlyweds" and a certified financial planner based in Birmingham, Ala. "Once they're out of the loop, they remain uninvolved forever." When one spouse controls the purse strings, the other spouse can be left in a vulnerable position when the marriage ends.
Women’s lack of knowledge in financial matters is a matter of serious concern on both a local and global level. And not just because of the the financial affects of divorce or widowhood. But because financial knowdledge is about self reliance, independence, confidence. I for one refuse to "dumb" it down to how much we spend on shoes and groceries. You are smarter than that.
It is accepted worldwide that women play a vital role in family and community life, yet their access to financial education has often been limited due to various social, cultural, and economic factors. For women to make sound financial decisions either for themselves or on behalf of their households it is vital they have sufficient knowledge and understanding of core financial principles. Deregulation of the financial services industry has increased the number and range of financial products, providing increased choice. To make informed choices, today's consumers require greater levels of financial capability than those of three decades ago where one was more apt to rely solely on a financial advisor or banker.
So I ask, how many of you participate in developing a budget for your household? Balance a checkbook? Fully understand your bank statements? Investment portfolios? The difference between a stock, bond, fixed income investment, a car loan or how to calculate present value? Know how to read an income statement or balance sheet of a company to guide your investment decisions? Or if you are skilled enough to understand, do you just choose to leave the details to your spouse?
Now, before all of your eyes glaze over and you wonder how I could start the year off with something so mundane, I am going to tell you why it is important.
- On average, a woman's standard of living decreases by 27% after divorce, according to Richard Peterson, of the Social Science Research Council.
- A staggering 87% of the poverty stricken elderly are women.
- Women live longer than men (an average of 7 years) so they need 20% more for retirement.
- On average, women earn 25% less than men.
- Since women tend to take time off to raise children or take care of parents (women take off approximately 11 years more from work than men), they save less than men do for retirement.
- After earning lower salaries for fewer years, women's social security benefits are about half of men's.
- The majority of women had certificates of deposit (CDs) in their retirement savings accounts when a more aggressive investment vehicle was more appropriate.
- Almost 1 in 4 women are broke within two months of a husband passing away.
- White collar crime is more prevelant amongst men and wives should not be in the dark (beleive me, I have seen it happen).
There's never been a better time for women to take control of their financial futures. Even if financial equality has not been achieved, women are more financially successful and independent than ever before. With that success comes a fiscal responsibility to organize and manage their financial health.
- There are over 10 million female-owned businesses in America, generating more than $2.5 trillion in annual revenue.
- Women are starting new companies at twice the rate of men, according to the National Foundation for Women Business Owners.
- Women tend to be better investors than men. According to a recent study by the National Association of Investment Clubs, women's investment clubs outperformed their male counterparts by a wide margin in 9 out of 12 years.
All of you can learn the basics, not just those of us in finance roles or with MBA’s. The Golden Women's Resource Centre of BC, believe women need information and support to learn about how financial health relates to their own health, safety and well-being. When women lack financial control and the skills to protect themselves financially, they become more vulnerable to domestic abuse and systemic violence. Funded by the Status of Women of Canada, they have developed a 3-staged program to help women increase their financial skills.
Upon quick glance, there are loads of classes being offered through universities, local learning centers, and online. Not up for the commitment of a course, take a look at some of the many sites I found dedicated to women and finance. A few note worthy ones I found were:
There are so many ways to get up to speed. Read, listen, watch. Your choice. Buddy up with a friend. But please think about making this a priority for 2012. Set a good example for your children, boys and girls. You and your family will be better for it and hey, you just might find a few extra shoe dollars in the process!