Is There a Gender Gap in Financial Literacy?

This is the third in a series of articles discussing the importance of financial literacy for women.

Several recent studies have suggested that there may be a significant “gender gap” between men and women when it comes to financial literacy. This may even include women with college degrees.

Many financial literacy experts have traditionally believed that most college graduates usually know enough about personal financial management to manage their money reasonably well. But a new study conducted by the Center for Women and Financial Independence at Smith College may cast some doubt on this assumption.

Failing Financial Literacy Scores

According to Mahnaz Mahdavi, the director of the Center for Women and Financial Independence, the mean financial literacy test score for women with at least a bachelor’s degree is only 47 percent. She notes that there was some correlation between financial literacy and a woman’s degree—those with a master’s degree in business did score well. However, at all other levels of scholastic achievement—including undergraduate, doctorate and law—women’s financial literacy scores were failing.

Not unexpectedly, scores rose somewhat with age and household income. But even college-educated women in their 60s achieved a median score of just 57 percent. “This is not good,” Mahdavi said in an article published earlier this year at

According to the study, financial literacy is greatest among women who have had some formal financial education, whether this is college courses or seminars in personal finance or sessions with money experts at work or through community programs. Meanwhile, the women who scored the lowest were most likely to be those who said they rely primarily on their friends for financial advice. “That’s not a good way to get your information unless your friend happens to be an expert,” Mahdavi said in the article.

Improving Financial Literacy

The importance of financial literacy among women becomes even more apparent when you consider that women are more likely to become widows than men are to become widowers. Therefore, it may be a good idea for some women to make strides toward improving their financial literacy and getting on top of their finances. Here are three suggestions for getting started:

1. Organize your financial paperwork. For many women, this is often the first step toward getting their financial house in order. This may mean attacking drawers and file folders stuffed with important financial documents, receipts and tax information. While this might seem like an overwhelming task, the best way to approach it is like eating
a 2 lb. steak – one bite at a time.

2. Track your income and spending. It’s hard to get a handle on your finances if you don’t know how much money is coming into your household, how much is going out, and where it’s going. Begin by creating a basic household budget, which will assist you track your income and spending. This will help you make better spending, saving, and investing decisions.

3. Create a savings and investment plan. Depending on how your budget shapes up, you may have some money left over at the end of the month that you can save or invest. Note that there is a difference between the two. Savings should usually be placed in a safe, liquid vehicle like a bank savings or money market account, so you can access it easily and without penalty for emergencies, if necessary.

But with investments, you might consider assuming more risk and less liquidity in exchange for potentially higher returns, especially if you’re investing to meet a long-term financial goal like retirement or your children’s college educations. Individual Retirement Accounts (IRAs), 401(k) plans, and Section 529 plans are some of the investment vehicles you might consider to help you meet goals like these.

Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates Inc. (DLA). This material does not constitute an offer or recommendation to buy or sell securities and should not be considering in connection with the purchase or sale of securities.



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