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Female financial literacy, participation needed in crisis

As I scroll through my personal emails, I am tantalised by “bargains”. As a 40-something woman, I am almost ashamed to say I have curated an inbox of homeware, shoe and sporting good offers.

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But there was not one email inviting me to build on my investments. And I’m an economist: surely I should l have done better!?

"The ugly COVID-19 recession has particularly hurt female-dominated industries such as retail trade and accommodation.”

The one bright spot was a book distributer’s email featuring “The Joy of Money”, a guide to financial independence for Australian Women by Kate McCallum and Julia Newbould. Beyond its sunglass-clad cover girl, the authors did advise money is about security and choice. Better, I thought.

I have noticed more media about women’s financial literacy in recent times. In fact, the words “women” and “financial literacy” appeared more than double the number of times in the February to April period in 2018 and 2019 than in any year previously. 2020 was an exception - but we all know why.

What concerns me is women trail men in financial literacy, yet more are financially independent of men. There have never been more women choosing not to marry, leaving relationships or partnering in same sex relationships.

The 2016 Household, Income and Labour Dynamics in Australia (HILDA) survey showed one in two adult women struggled with basic financial literacy concepts such as inflation, compound interest and risk diversification. This compares with one in three adult men.

The University of Melbourne’s Roger Wilkins said the HILDA report shows low financial literacy is associated with poor financial wellbeing. Wilkins added women are over-represented in poverty statistics and other measures of socio-economic disadvantage and “low financial literacy cannot be ruled out as a factor in these outcomes”.

ANZ’s 2015 Survey of Adult Financial Literacy in Australia found women aged 28 to 59 years had lower scores on average than men on financial aspiration. The consequences were fewer assets, lower participation in paid work and lower levels of post-secondary education.

Women also said they found dealing with money more stressful and overwhelming than men did, according to The Australian Securities and Investments Commission’s (ASIC) 2017 Australian Financial Attitudes and Behaviour Tracker.

Out of balance

Even young female economics students appear to show less interest in money than their male counterparts.

A 2020 RBA report of high school economics students asked which economic topics they were most interested in. Girls were more likely to cite ‘identifying problems’, boys were more likely to cite the ‘share market’. Women, generally, are much less likely than men to invest, with women making up only 18 per cent of 750,000 active online investors according to investment trends research from Firstlinks.

To top it off, the ugly COVID-19 recession has particularly hurt female-dominated industries such as retail trade and accommodation. Over April and May, 446,000 women lost their jobs compared with 389,000 men. The workforce participation rate fell 3.4 percentage points for women and 2.7 percentage points for men.

Women are the majority of carers of children and sick or elderly relatives and their unpaid workload has lifted. Many have had to pull out of, or back away from, the workforce resulting in under-employment or lower wages.

More women than men also work casually and therefore missed out on the initial $A1,500 fortnightly JobKeeper payment, relying instead on the lower Job Seeker payment. ANZ’s 2015 survey showed casual workers were already behind, being less financially literate than their permanent counterparts.

Changed policy has allowed those impacted by COVID-19 to defer mortgage repayments or access their superannuation, which has long-term financial implications. Superannuation balances were already inadequate for many women going into the current crisis and women are more dependent on the pension than men. This reflects persistent gender pay gaps, higher prevalence of part-time work by women, workforce breaks for caring responsibilities and longer-life spans.

Motivated by money

So here we are: in an environment where women are more financially vulnerable than men - and paying less attention to their own finances. It’s a bad combination.

The good news is the women who do invest are good at it: their behaviour is more likely to result in higher portfolio returns than men’s. Many authors on the topic suggest women’s risk aversion may also make them less prone to bad investment decisions. They are more likely to spend time researching and matching their investments to life goals. And they remain calmer than men through wild market movements.

I personally plea to women to think about their own finances. Be wary of marketing constantly aimed at getting you to depart with your cash. Think about how your good judgement and careful approach is a valuable attribute in investing.

It shouldn’t be cringe worthy for a woman to be motivated by money. Why is it crass for a woman to want to be able to look after herself, no help required? We all have the right to desire a healthy stockmarket portfolio, a wholly-owned home or an early retirement.

Carrie Bradshaw said "every once in a while, a girl has to indulge herself". My inbox reminds me of that every day. But a girl also needs to know when to tuck away a tenner and invest it for rainy day.

Cherelle Murphy is Senior Economist at ANZ

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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