Women and Money: Even College Grads Flunk Personal Finance

One of the chief conclusions that financial literacy experts have drawn in recent years is that college graduates typically know enough to manage their money reasonably well. Now, a new study looking specifically at educated women throws that conclusion into question.

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One of the chief conclusions that financial literacy experts have drawn in recent years is that college graduates—whether or not they took a personal finance course—typically know enough to manage their money reasonably well. It’s the other three-quarters of the population that gets into financial trouble. Now, a new study looking specifically at educated women throws that conclusion into question.

The mean financial literacy test score for women with at least a bachelor’s degree is just 47%, according to Mahnaz Mahdavi, director of the Center for Women and Financial Independence at Smith College. Mahdavi’s study has not yet been published. She reported her findings during a conference at the Council for Economic Education.

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Mahdavi says hers is the first close look at this segment of the population, and that the low scores shocked her. “You presume higher financial literacy with higher education,” she says. To an extent, there was a correlation. Women with a master’s degree in business scored well. But at all other levels of scholastic achievement—from undergrad to doctorate or law—the scores were failing.

Mahdavi found that the scores rose with age and household income. But the median score peaked at just 57% for college-educated women in their 60s.  “This is not good,” she says. “By that age they should have had a financial plan in place for years.”

Money knowledge is greatest among those who have had some kind of formal financial education—courses in college, a seminar, or sessions with money experts at work or through community programs.  Those who scored the lowest were most likely to say they relied on advice from friends. “That’s not a good way to get your information unless your friend happens to be an expert,” Mahdavi says.

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Her study jibes with one from Financial Finesse, which provides workplace wellness programs. In its Gender Gap in Financial Literacy 2012 report, the firm found that even as women have made great strides in workplace parity they have lagged badly in key areas of financial planning. According to the study:

  • 43% of women have an emergency fund, compared to 63% of men
  • 52% of women are comfortable with their non-mortgage debt, compared to 71% of men
  • 37% of women have assessed their risk tolerance and are aware of their conservative, moderate, or aggressive investment strategy, compared to 57% of men
  • 25% of women rebalance their investment accounts to keep their asset allocation on track, compared to 49% of men

The gap has all but closed in areas like retirement and estate planning—and should close in other areas soon. Twice as many women seek formal financial education, Financial Finesse found. This is important because women live an average of five years longer than men; nine in 10 will be solely responsible for their finances at some point in their life.

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