It is well established that financial literacy is a key component of financial independence. The more you know and understand about finance, the better equipped you are to make important decisions. Historically, women have had lower financial literacy scores than men for many reasons, including social norms, a lack of access to resources, and needing to focus on other issues.
That said, women are living longer than men and studies suggest they face systemic barriers that make it difficult for them to achieve the same level of economic security and financial literacy that men can obtain. This, in turn, makes it increasingly difficult to accumulate wealth, plan for retirement, and invest money, despite women’s increased involvement in higher education and in the workforce.
In recognition of International Women’s Day, here are some steps women can take to increase their financial literacy so they can make informed financial decisions.
What is financial literacy?
Financial literacy is an understanding of the value of money, how money works, and how to make money work for you.
Seek out information
Unfortunately, due to a lack of access to educational resources, a lack of financial resources and ongoing stereotypes about women’s ability to manage finances, women have often been shut out of financial conversations.
A great step in building your financial literacy is to start pursuing information and knowledge. There are many resources available online, including introductory personal finance courses, newsletters, podcasts, and websites that explain key concepts. Many of them are written for a general audience, so they’re designed for beginners to understand.
Find them, subscribe to them, and learn from them. Ask us for specific recommendations for your situation.
Find an advisor you trust
Women tend to view financial risks and investments differently than men do, and they tend to feel less confident in financial conversations. Find an advisor who respects you and your goals, and understands your unique financial needs. Make sure it’s someone you feel comfortable talking with and asking questions of. Ask them to explain everything to you, so you understand all the important terms, phrases, and strategies.
Don’t be tempted to think you’ll never understand finance. You can, and you will. You just need someone to explain it to you in a way that is meaningful to you. And you need someone who builds a strategy based on your financial responsibilities and pressures.
Build an emergency fund
Build an emergency fund of your own. Having an emergency savings account gives you some financial independence, in case of a crisis. Find a way to save up three to six months of expenses, so that if you lose your income or financial resources, you have some breathing space. The work you put into saving that money and managing the savings account will teach you about how money works.
Check your credit score
If you have any credit in your name, you have a credit score. Knowing it and understanding the role it plays in your finances is a massive step towards financial literacy. Your credit score affects your eligibility for loans, leases, credit cards, and mortgages. Utility companies might check your credit score when you open an account, and rental agencies take it into account when renting to you.
If your credit score is low, look into ways to build it up. There are many resources available to teach you about improving your credit score.
Continue educating yourself
You don’t have to become an expert in finance to be financially literate, but having a basic understanding will help you make better financial decisions, and it will help you get on the path to financial independence.
Commit yourself to continually learning about finances, or at least to always being involved in your financial decisions, so you have control over your future.
Financial independence involves you having the money you need to live the lifestyle you want, but it also means being confident in making your own financial decisions. Financial literacy can give you some of the confidence you need to make important decisions.