Women Can't Build Secure Futures Without Financial Literacy


Jun 27, 2024

Hands of a woman holding a piggy bank and putting a ten-pound note into it, photo by FJZEA/Getty Images

Photo by FJZEA/Getty Images

Women receive far less income from private pensions than their male peers, with the gender gap in private pensions estimated to be 35 percent in Great Britain. An important but under-explored cause of the gender wealth gap is financial literacy, one of the issues explored in RAND Europe's study on financial independence and gender equality.

Lower pension income is compounded by the gender wealth gap, which tends to increase with age and is highest amongst those of retirement age. Older women with insufficient resources may be reliant on a partner or other family member to make ends meet. Analysis of government statistics by Age UK (PDF) shows that of the retirement age population, it is older women living alone who have the highest risk of poverty.

Of the retirement age population, it is older women living alone who have the highest risk of poverty.

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Many of the reasons underpinning these trends are well understood. Women are paid less than men on average, a trend not fully explained (PDF) by gender differences in education or the types of jobs that women and men tend to do. Women are far more likely than men to work part-time and to take time out of the labour market due to caring responsibilities. These trends are still clearly observed today but were more pronounced for older generations of women, whose households were more likely to conform to a traditional 'male breadwinner' model.

Studies consistently reveal a stark gender gap, with women apparently displaying lower levels of financial knowledge compared to men. This discrepancy is evident in surveys like the 2023 Eurobarometer and 2023 OECD/INFE, pointing to a global issue. Interestingly, one study found that women who initially answer “don't know” to financial questions (PDF) often answer correctly when that option is removed. This suggests a confidence problem, rather than solely a knowledge gap.

Low financial literacy hinders the ability to invest in wealth-generating assets like stocks and businesses, which offer higher returns but also carry more risk. This is particularly important for women due to the existing employment and pension gaps, making wealth accumulation even more critical for their long-term financial well-being and independence in retirement. Additionally, limited financial literacy can trap those in unhealthy relationships, as lack of resources makes it harder to leave an abusive or controlling partner.

Interest in this topic, sometimes referred to as financial feminism, is growing, from the World Economic Forum to local initiatives. The movement aims for financial inclusion and equality for women, not just in terms of earnings but also in building and owning wealth, empowering them to achieve economic security and independence throughout their lives.

Some countries have taken steps to incorporate financial education (PDF) into the school curriculum, helping young people to develop the skills needed to navigate financial decisions across the life course. There has also been a proliferation of products and initiatives designed to improve financial literacy among adults, many of which focus on educating and empowering women. Women who want to improve their financial knowledge and confidence can now listen to podcasts, take e-learning courses and download apps developed for this purpose.

Limited financial literacy can trap those in unhealthy relationships, as lack of resources makes it harder to leave an abusive or controlling partner.

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However, some resources come with a price tag and may not be accessible to women on low incomes. Other barriers may be associated with language skills (with access more difficult for women from an immigrant background) or lack of confidence and familiarity with new technologies, an issue likely to disproportionately affect older women. For instance, despite being free, the Your Juno app (mission: 'to give women and nonbinary people the financial knowledge and confidence to build their wealth') reports that 85 percent of its app users are aged between 18 and 34 and 93 percent are university educated.

Despite the emergence of financial feminism and greater policy attention paid to this topic, women who face the greatest challenges in securing financial independence may still face barriers to improving their financial literacy. Women would benefit from free, diverse, and accessible forms of financial education. Addressing financial literacy for women is crucial because it directly impacts their ability to build a secure future.

Madeline Nightingale is a research leader at RAND Europe, currently working in the areas of home affairs and social policy. Joanna Hofman is RAND Europe's deputy director of employment, skills, and equality research.

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