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Talking Money With Mom: Gender, Generation and Financial Knowledge

This Mother's Day, after you present her with the flowers and the ever-important card, take a few minutes to talk money with Mom. Across generations, women continue to trail men in financial knowledge—but the gap may be closing.

"It is encouraging that the gap in
financial literacy and self-assessed
financial knowledge appears to
be narrowing for millennials—a
trend that bodes well for women
in the future," said FINRA
Foundation President Gerri Walsh.

The Financial Literacy Gender Gap

You might have heard about the gender gap that exists between men and women when it comes to financial literacy. Financial literacy—having the knowledge to make informed financial decisions—has been linked to a number of important outcomes, including wealth accumulation, stock market participation and retirement planning. So it's an important topic for the whole family.

"Women consistently score lower than men on financial literacy measures, and this gender-based gap may negatively impact women's long-term financial well-being," said FINRA Foundation President Gerri Walsh.

To better understand the gender gap, the FINRA Foundation examined financial knowledge levels in America by gender and generation at three points in time (2009, 2012 and 2015) over a six-year period, using data from the FINRA Foundation's National Financial Capability Study (NFCS). Overall, the data suggest that over a six-year period the gender gap in financial literacy has persisted.

For the three largest generations (i.e., millennials, gen Xers and boomers) and at all three points in time, men exhibit higher levels of financial literacy, based on answers to a five-question financial literacy quiz. Here are some key findings:

  • A narrowing gender gap. Millennial women exhibit the lowest levels of financial literacy, but the gender gap starts to narrow among younger generations. In 2015, the gap in financial literacy between boomer men and women was 19 percent, and for gen Xers 18 percent. But for millennials, it was only 10 percent. This result is driven by a decrease in financial literacy for millennial men and a slight increase for millennial women during the six-year period studied.
  • Increased self-assessed financial knowledge. Unlike financial literacy, which has remained at about the same level over the last six years, self-assessed financial knowledge—regardless of gender—increased significantly between 2009 and 2015. For example, in 2009 69 percent of boomer women rated their financial knowledge as high, in 2012 the figure went up to 72 percent, and in 2015 it rose to 78 percent. That same upward trend is consistent for men and women in all three generations.
  • Rising confidence in financial knowledge among younger generations. Younger women express more confidence in their financial knowledge compared to prior generations, a factor that many believe contributes to the gender gap in the first place. The percentage of married women who report that they are the most financially knowledgeable person in the household has increased since 2009, and it is highest for millennial women—53 percent for married millennial women in 2015 compared to 48 percent for married gen X women and 40 percent for married boomer women. 
  • Growing exposure to financial education. Across generations, women were less likely than men to report that they were offered financial education, and older generations regardless of gender reported less exposure to financial education. Millennials reported the highest exposure to financial education: 45 percent of millennial men and 33 percent of millennial women. While only 23 percent of boomer women and 27 percent of gen X women report being offered financial education, and 30 and 35 percent for male boomers and male gen Xers, respectively.

"It is encouraging that the gap in financial literacy and self-assessed financial knowledge appears to be narrowing for millennials—a trend that bodes well for women in the future," said FINRA Foundation President Gerri Walsh. "While a number of factors might influence these changes, access to financial education could be making a difference as men and women who participated in financial education in high school, college or the workplace tend to have higher levels of financial literacy."

A Path Forward

Understanding where we stand when it comes to our financial knowledge is a good first step to taking action. Here are four ways to keep the momentum going to secure long-term financial security for all.

1. Set financial goals.

To get you moving, start by writing down three financial goals you want to accomplish. For example, you might want to purchase a home, start a business or fund a child's college education. Prioritize your goals and set timelines for when you want them to be accomplished.

2. Set aside money in an emergency fund.

An emergency fund, or "rainy day" fund, can help you stay out of debt when things don't go as planned. To put it in perspective, if you set aside just $10 each week, you will have saved more than $500 in a year. Follow these steps to get started.

3. Build your knowledge of key investing concepts.

Familiarize yourself with key investing concepts, such as diversification, asset allocation and the basics of investment risk. A basic understanding of these major concepts will serve you well throughout your investing life, and may come in handy in the event of an unexpected event. You can also take the investor literacy quiz to test your investing knowledge.

4. Work with an investment professional.

Consider working with a qualified investment professional. These professionals can help guide you through the process of making investment decisions, assist with financial goal setting and keep you informed about how the economy and financial markets are affecting your investment portfolio. Before you sign on with an investment professional, be sure to use FINRA BrokerCheck®, a free tool to research the background and experience of financial brokers, advisers and firms.

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