To highlight the insidious and persistent gender gap that exists concerning financial literacy, a payments and fintech company conducted a simple social experiment. They asked thirty men and women of all ages to stand in a line and answer a series of questions, prompting them to move forward for each “yes” response, and backwards for each “no.”
The initial questions were general, and the participants laughed among themselves as they stepped back and forth in jagged rows. Eventually, however, the questions turned to personal finance topics, and the participants grew quiet, as the men moved ahead based on affirmative responses. By the end, there was a literal gap between the women and men, illustrating how when it came to understanding and actively driving their own finances, women were left behind.
It is certainly a striking image, but what I found even more revealing were the comments the women made indicating a lack of awareness about the size of their own knowledge gaps. “I realised there was a slight unfairness, but it seemed normal,” one answered, while others expressed regret that stereotypically masculine and feminine roles had been assigned before they were empowered to push back. “I wish I had known [about finance] from the beginning of my childhood,” another participant said. “I would be doing so much better.”
If we are to break this cycle and close this gap, I agree – financial literacy needs to start earlier, and our knowledge of the topic needs to be more explicit and comprehensive.
Math matters
People who don’t understand math don’t understand numbers, and therefore also don’t understand finance. I believe that the vast majority of folks, both men and women, would financially benefit from a deeper understanding of math, and if it were up to me, I’d introduce a financial literacy/personal finance planning course as part of a child’s basic education. That said, boys tend to outperform girls mathematically relatively early, with research showing that 11 year old boys in the UK are 4% more likely than girls to achieve the expected standard in maths, and 8% more likely to score higher in standardised tests. Similar findings from other countries indicate that this is a widespread problem, and it’s reasonable to expect that girls who have fallen behind on mathematical knowledge may find themselves at a disadvantage when it comes to not only understanding their finances but feeling empowered enough to take control of their financial futures.
Live and earn
~Novel Serialisation: Heavens Fire~
Financial literacy is based on five pillars: earn, spend, save, invest, borrow, and protect. In my experience, women most often lack education around the first pillar – earning. Of course, the gender pay gap is well-known and already a subject of international activism, but as I touched upon before, existing data concerning gender differences in mathematical performance can help us understand why women study and pursue traditionally lower-paying careers.
Women are under-represented in high-earning STEM (science, technology, engineering and mathematics) fields and across the board, gravitate toward degrees that lead to jobs earning less than men – 6 percent lower among average earners and a whopping 10 percent lower among the highest-paid professionals.
When held up alongside data from MIT that women are 14 percent less likely to be promoted, despite receiving higher performance reviews on average, it paints a bleak picture of women’s earning potential. This is why I strongly believe women must be proactively educated about earning – what careers pay well, what education and experience is needed to succeed in those roles, and how to advance in a way that comes with increased income. This encouragement should come from education, but also from family and peer support, to ensure they have the best chance of earning. This will help women not only close the gender gap but also become more financially literate, because higher income and earning potential will empower them to take control of their finances and maximise the potential of their money.
Cut the cards
The concept of credit has made finance more confusing and overall, has had a negative impact on the financial health of society. First, credit and debt are poorly misunderstood. Even economists have a difficult time understanding and explaining how debt affects the global economy, so is it any surprise that individuals struggle to manage credit? I strongly believe that when people think in terms of saving for what they want and planning accordingly, as opposed to using credit to make impulsive purchases or buy those things immediately, they become more financially literate. This approach also forms the foundation of conscious consumption. When we think about sustainability not only for the good of the environment, but also in terms financial sustainability, it naturally helps you gain control of your finances, because you’re being mindful about spending.
Women who want to gain control of their finances, or girls who are starting their journeys toward financial independence, should start by reducing the role of consumer credit as much as possible. My father made the value of money very clear to me when I was very young, and as a result, I am very financially disciplined. When we earn enough to purchase the items we want, those purchases are more valuable. I believe that reducing credit ultimately results in a healthier financial picture for most individuals, and it’s important to shift your strategy as quickly as possible, given the cost crisis – an Office of National Statistics survey in October 2022 found that of the 93% of adults who saw an increase in their cost of living in October 2022, 14% reported using more credit than usual as a result.
Building a strong mathematical foundation, making smart choices that enhance earning, reducing credit, and being conscious of consumption are actions all women can take to become financially empowered. These actions are even more impactful when elevated from individual tasks to systemic changes. By offering advanced mathematics and financial planning early in education and encouraging women to invest in themselves by pursuing high-earning careers, then encouraging all individuals to reconsider credit use and consciously consume, we all stand to benefit from efforts to help close the financial literacy gap.
By Alina Sychova
Alina Sychova is Executive Director, Capital Markets and M&A for Auerbach Grayson, an independent agency-only global brokerage firm founded in 1993 to serve institutional investors seeking to invest in securities markets throughout the world. Alina has 20 years of banking and financial experience and was previously Head of Capital Markets Origination at Sova Capital, Head of Equity Capital Markets at Gazprombank, and Head of CIS Equity Capital Markets at Citi. She started her career at Bank of America Merrill Lynch as execution banker for Emerging Markets on a variety of deals, including M&A, rating advisory, capital markets, and structured finance solutions. She holds a Masters in Finance from London Business School and B.A. in International Business and B.S. in Finance from Ramapo College of New Jersey.
