How Men and Women Think About Finances

Results from the FINRA Investor Education National Financial Capability Study revealed that women with low levels of financial literacy knowledge were more likely to engage in bad credit card behaviors such as incurring late fees than men with low levels of financial literacy knowledge. 

However, there were no differences in behavior between men and women with high financial literacy knowledge. Increasing financial literacy knowledge can improve credit card management and reduce or eliminate gender based differences in credit card behavior.

Financial literacy is linked to retirement planning, investing, quick cash methods such as payday loans or cash advances, and generating wealth. A vast understanding of financial literacy improves credit card behavior for men and women.

Women were more likely to carry a balance, pay the minimum payment on their credit cards and be charged a late fee.  Women were less likely to pay their credit card balance in full each month and comparison shop for credit cards.

Women trail behind in finances and usually have low confidence when trying to set and obtain financial goals.  Many women shy away from finances and don’t view managing their finances as a high priority.  Many women focus more on their appearance and spend their money on shopping or entertainment.  Women put other’s needs first and focus on other priorities such as their children, college funding, etc.  However, women must put their needs first especially regarding finances.

The difference in how women view money may be related to how parents and educators teach girls about money.  These girls grow up and continue to use the same lessons they learned about money as a child.  Women are more emotional when it comes to spending.  Women like to spend money on things with little to no value like makeup, clothes, purses, shoes, etc. 

Many women are taught to find a husband who will take care of them which may prevent them from learning about the various aspects of financial literacy such as budgeting, investing, savings, debt management and retirement planning. Many women feel they don’t need to learn about finances because their husband will manage the finances. 

Women have to change the way the think about money and set an example for their daughters and future generations of girls.  If you want to own a home, go on vacations and live a certain lifestyle you have to save, invest and make good financial decisions.

Many women are forced into different roles when a life-changing event occurs.  Many women find themselves unemployed, divorced or widows and didn’t know how to manage their finances.  This can lead to making bad financial decisions based on emotion and mistakes that may take years to recover from.

According to the Prudential and Hearts & Wallets study women feel less confident than men in their understanding of financial products, their ability to make financial decisions and their perception of their current economic standing.

The financial services industry caters to men in the way it presents and discusses information and products.  Women don’t make quick decisions regarding finances and are concerned with long-term results.  Women are not proactive about learning how to manage their finances and take it for granted that they won’t need to learn because their husbands will do it for them.  

Women earn less than men but have longer retirements due to the fact that women live an average of five years longer than men. Women have higher health care costs throughout their lives.  Women should be saving more than men and investing their savings more aggressively to get a strong long-term return that will grow their portfolios.

Women who don’t manage their finances properly directly affect men. If your wife or girlfriend always asks you for money or needs help with her bills, if you provide financial support to your mother because she has little to no savings or retirement or your daughter keeps borrowing money because she can’t pay her bills - this is a direct result not properly manage their finances and lack adequate financial literacy knowledge.

Men are self-directed learners and use the Internet to find out information more than women.  Women tend to rely more on personal networks with friends, family and financial planners, and they take a networking approach to gathering information or get validation. Men and women need to have a strong grasp financial literacy knowledge to help them make sound financial decisions that will improve their lives. 

Financial Empowerment Advice for African Americans

African Americans spend $1 trillion annually.  One dollar circulates in Asian communities for 30 days, in Jewish communities for 20 days, and white communities 17 days. However that same dollar in African American communities circulates every 6 hours. What this means is that a dollar earned in the African American community leaves that community before the sun goes down. In other communities it stays for weeks on end. 

In addition, a mere .2%, or $.02 of every dollar an African American spends in the U.S. goes to African American owned businesses. Ninety-four percent of African Americans have some type of debt: credit card debt, student loan debt, mortgage debt, or personal loan versus 5% of Americans who have some type of debt excluding their mortgage.

By comparison African Americans spend most of their money or credit on: clothing, appliances, alcohol, cars, electronics, computers, cell phones, clothing, travel, hair care, accessories, food, and household furnishings versus other communities who balance their spending with saving, investing and homeownership. 

Brand name products represent 82% of African American households’ total purchases compared with 31% of private labels and less than 1% of purchases from African American businesses. African Americans are a community of spenders and often times don’t balance their consumer spending with investing, saving and generating wealth the way other communities do.  It’s time to become a community of savers, investors and owners. 

Solutions to help African Americans effectively manage their money:

1. Generate wealth. Some ways to generate wealth are becoming a homeowner, starting a business, investing in real estate, planning for retirement, becoming a franchise owner, capitalizing on compound interest, and keeping debt low. Home ownership is 44% among African Americans, but should be much higher.
2. Hustle. Start a part-time business while working full-time to earn extra money. Use the money to contribute to a retirement account or pay off debt.
3. Do better. Do better than your parents or grand-parents. 
4. Save. Save 10% - 20% each money towards a retirement account.
5. Plan for the Unexpected. Create an emergency savings account to cover monthly bills and expenses for 9-12 months.
6. Passive. Find at least way to generate passive income.
7. Reduce spending. Reduce monthly spending by 30-50%. 
8. Mortgage. Pay off your home prior to retirement.
9. Retirement. Consult a financial advisor to ensure you contribute enough money to reach your retirement goals.