Little girls and money

How to bridge the money gap and stand up for equal pay.

Mastering our budget, savings, and investments will ensure independence and stability. Why is it, however, so easy for women to fall behind in financial literacy and how can we educate our daughters to keep up with the boys?

Financial literacy is a crucial life skill to understand how to make use of our money. When the financial crisis hit in 2008, the Organization for Economic Co-operation and Development (OECD) pointed at the lack of financial literacy as a contributing factor (Messy, 2009). Since then, governments have slowly adopted strategies to integrate financial education into the school system so that kids become educated citizens with more protection and better planning skills.

Unfortunately, financial literacy and attitudes towards money largely differ between boys and girls (Rinaldi & Todesco, 2012). A 2018 research study surveyed 1000 parents to analyze their approach with their kids and money. Parents educated girls more on budgeting, tracking their expenses, and saving money, whereas boys were more educated on credit scores, taxes, bank accounts, and investing by their parents. In other words, girls were taught to limit their spending and be safe, whereas boys were taught how to build wealth and be proactive with their money. Interestingly, boys were also taught by their parents to donate more than girls.

The gender gap in financial literacy carries on until adulthood, possibly due to the role of marriage and who makes financial decisions (Fonseca, Mullen, Zamarro, & Zissimopoulos, 2012). A Swedish survey recruiting 1300 participants also indicates a gender gap in stock market participation. They found that women were less likely to participate than men in the stock market and this could be due to the discrepancy in financial literacy, as women scored much lower than men (Almenberg & Dreber, 2015).

If women in general are less financially literate than men, this burden carries on when they get older and are more likely to outlive their spouse and be widows. Being less financially literate continues to be a problem later in life. 59% of widows and divorcees wish they had been more engaged in their finances when making long-term decisions and 74% of them still consider themselves not very knowledgeable about money management. According to a 2008 study, older women in the USA still show very low levels of financial literacy and very few of them have done any planning for retirement (Lusardi & Mitchell, 2008). The bad habits of overspending, excessive credit card use, and poor planning can be damaging as it can prevent one from retiring.

Some women have needed to go through a divorce, the loss of a family member, or declare bankruptcy before they face the reality of their finances. there’s no reason to wait for a life changing event to learn about finances. Getting your finances straight might be difficult for some people because facing your spending habits can be quite difficult. No one wants to be portrayed as an impulsive spender, but it is important to understand how you spend your money to succeed. . However, the good news is that it’s very easy to take financial literacy one step at a time. It’s also easier to learn about finances as a kid if there’s no taboo on money talks in the family.

Here’s how we can help women, especially young girls to stand up for themselves and be confident with their money management.

What did you hear when you were young?

When I was young, my parents and grandmother emphasized that getting good grades in school was important, but they always asked me how many children I wanted as if being a stay at home mom and homemaker was my destiny. My family grew up in rural Cambodia and up until my parents’ generation, the wife supported their husband’s career by looking after the children. It was pre-determined that I had to become a housewife. When I told my mother about going to grad school, she was confused and tried to dissuade me for a while. My father said I should focus on making good use of my eggs while they were still fresh although I was only in my mid-twenties. Having a good and fulfilling career wasn’t a priority for daughters. I heard their opinions, but I didn’t follow their advice.

Money was sometimes scarce, but we never starved or lacked anything. The role models I had growing up showed me that money ought to be saved as much as possible in case of emergency. We shopped for discounted food and always sought the best possible deals. My father also made use of furniture found on the streets and my mother still picks up leftover unsold fruits and vegetables at the local grocery store. They were simple people who would rather put their energy into saving than building wealth. Again, my goals differ from theirs, so I had to detach myself from my family’s advice and walk my own path towards financial freedom. Family members and friends will always share their opinions based on their own experience. Even with the best intentions, they cannot always be right and knowledgeable about managing money. Thus, it’s important to get properly informed and have an objective financial education.

Who should I listen to?

The most obvious answer is yourself. But even with hours of meditation on a yoga mat, it’s not always easy to find clarity. First, find the people who have the life you envy. Who in your surroundings has a life you’d be happy to have? Ask this person to share their life story and experience with their career and money, the gender gap, competition, work life balance etc. However, people can only suggest what has worked for them, so get complementary information from a professional banker. It can’t hurt to get multiple opinions from both personal and professional people.

Choosing a trusting financial advisor isn’t easy, but you do not have to wait for a husband, a boyfriend or a father to push you to deal with your finances. Take the first step and look for a bank or a financial advisor. Options are limitless because a lot of qualified advisors will give you the same deal, so pick someone you trust and that will have your best interest at heart. Perhaps, look for a fiduciary, which means that anything they sell has to suit your needs. You can ask if s/he is a certified financial planner (CFP), which could add credibility.

There’s no stupid question for your financial advisor

When I first started investing in my mid 20s, I had already felt behind. I was really embarrassed to ask my banker about my portfolio and what were the fees he was charging me for managing my account. When I opened an investment account, I was lost in the myriad of information. I continually nodded over the phone the whole time, agreeing with my financial advisor’s deep voice. I trusted whatever he was saying. I didn’t want him to know that I was ignorant about money, which I sadly was.

There are no stupid questions for your banker. If anything, s/he doesn’t get enough questions from customers. Anyone can make that phone call and ask for clarifications and make sure they’re on track to their financial plans. Don’t hesitate to google your financial advisor, take a look at their career path, and check their records (if they have any). Ask your friends or family for a referral, they might know someone they trust. Asking the right questions to your financial advisor is essential to start on the right foot and establish trust.

Ask many questions that will build a connection between you two and ask how they get paid. Is it hourly or is it a percentage? Ask for their best investment success stories and what kind of clients does s/he deal with. I asked my financial advisor to go through my account with me and explain why he picked the stocks he thought would do well. I also asked him about taxes and how to read my portfolio. He never shunned my questions even as basic as they were.

Make your own decisions and take action

In grad school, I felt stuck with a low-income salary and no extra time for another job. I simply googled how to make more money. I got the suggested books The Wealthy Barber and Rich Dad, Poor Dad. I was pleasantly surprised because those books were both educational and entertaining stories. I couldn’t agree more with the ideas presented in the books because they include practical tips on investments and how to seek financial freedom.

That year, I made a goal of being financially independent before I reached 35. I gathered my courage and called my financial advisor to get a more aggressive portfolio. This time, I asked all the questions I needed answers to. He was a little surprised by my sudden curiosity, but he congratulated me on my financial literacy at the end. After this, I felt more connected to my goals, and more confident that I could get a better understanding and control over my money.

Finance books are entertaining and hilarious

Talking about books, here are two of my favorite self-help books on finances:

- Secrets of Six-Figure women: Surprising Strategies to Up Your Earnings and Change Your Life by Barbara Stanny.

More than 150 women were interviewed to learn about the benefits, pitfalls and addictions of making 6 figures. This book is awesome and teaches you how to be aware of your worth, raise your confidence, and trust your journey in money-making. I could not put this book down so I read it in a few days. I’ve always wanted to reach financial freedom, but I needed this book to be more aware and aligned with my ambition. I recommend this book to every woman, whether they are struggling financially or not. It is beautifully written to empower women and make them feel like they can accomplish anything they put their minds into.

- You are a Badass at Making Money: Master the Mindset of Wealth by Jen Sincero

I received this book as a goodbye gift. I initially did not understand why I needed it because I had been in a stable financial situation as a researcher in a pharmaceutical company. However, this book really increased my sense of optimism and I also enjoyed the practical exercises provided in the book. Sincero is very funny and inspirational, and the book has stuck with me because of that. It helped plant the seeds in my mind of my desire to be financially independent.

Both books are accessible and easy reads. They are tailored to women of every age. Book learning doesn’t work for everyone, but I encourage you to gleam whatever information you can from these suggestions. They are not a classroom or a course, so you can enjoy it at your own pace. Have fun reading these books, and if you do not enjoy them, I encourage you to find another book that will fit your reading preferences. For more recommended books, see here.

Fight stereotypes

Why do we still have issues with equal pay in 2020? While some people think that women choose to prioritize their family over work, others think that women have a preference for low-paying jobs. It’s true that family obligations and choosing the right career impact salary, but it doesn’t account for the fact that women are paid 80 cents for each dollar that a man earns. The inequality actually starts at home with allowances, the average earning for girls and boys is unfair. According to Heritage Bank, girls earn on average $9.6 and boys earn on average $13.

Gender bias is an unconscious thinking that favors men over women in the workplace. This stems from stereotypical gender views we have about men being better leaders and women being nurturers and care takers. In order to prevent the stereotype from affecting your daughter, help her increase her confidence and awareness. Teach her that if she does the same work as a man, she should get the same salary. If it’s not the case, learn to negotiate or leave the job. Negotiating a better salary can be scary for some people but can be overcome with practice. There will always be a better environment that respects your work rather than staying in an unfair place.

Work together on negotiating skills or participating in a public speaking event. You can also increase that confidence by introducing your daughter to a fun activity. Instead of the usual summer camps, kids can enroll in a summer camp focused on financial education, which only costs $300/week. It is never too late to start learning financial literacy. The more you learn and spread it around you, the easier it will be to face challenges in the future.

Take home message:

In 2018, only 17 states in the USA require high school students to take a course to be aware of their finances. Girls and women are mostly affected by the lack of financial literacy. Some families are still uncomfortable bringing up the topic of money but overcoming shame and embarrassment around money talk is crucial. As a woman, it is your responsibility to set your financial goals and take actions.

Talk about money. Talk about salaries. Talk about things like this so they are not uncomfortable, because they are important. I learned that talking about money was rude, so I just assumed people saved their money quietly. Consider the messages you received about money when you grew up, ask the people you admire for life advice and get complementary info from a financial advisor you trust. Find your own path, be confident about your financial goals and ask all the questions you need to make sure you’re on track with your portfolio.

For your own interest, read some finance books. Some of them are written for women and bring a humorous touch to your reading. Once you’re more informed, be brave. Negotiate your salaries and dare to lead people. Train younger girls to speak in public and to be conscious of their worth. Remember that you can achieve anything you put your mind into, money making and financial independence aren’t the exceptions.

References

Almenberg, J., & Dreber, A. (2015). Gender, stock market participation and financial literacy. Economics Letters, 137, 140–142. https://doi.org/10.1016/j.econlet.2015.10.009

Fonseca, R., Mullen, K. J., Zamarro, G., & Zissimopoulos, J. (2012). What Explains the Gender Gap in Financial Literacy? The Role of Household Decision Making. Journal of Consumer Affairs, 46(1), 90–106. https://doi.org/10.1111/j.1745-6606.2011.01221.x

Lusardi, A., & Mitchell, O. S. (2008). Planning and financial literacy: How do women fare? American Economic Review, 98(2), 413–417. https://doi.org/10.1257/aer.98.2.413

Messy, F.-A. (2009). Financial education and the crisis. Retrieved January 6, 2020, from https://www.oecd.org/finance/financial-education/50264221.pdf

Rinaldi, E., & Todesco, L. (2012). Financial Literacy and Money Attitudes: Do Boys and Girls Really Differ? A Study among Italian Preadolescents. Financial Literacy and Money Attitudes: Do Boys and Girls Really Differ? A Study among Italian Preadolescents, 4(2), 143–165.