When it comes to money!

Financial literacy across genders

Valentines Day has now widened from a celebration of ‘coupledom’ to a chance to acknowledge all kinds of love – for family, friends, even pets. This means it’s now a day for everyone, not just those ‘in a relationship’.

It did get us thinking, though, about the way that couples can bring out the best in each other – or perhaps the worst – when the discussion turns to money.

There are two things at play here.

Firstly, any two humans are likely to view and manage their money differently when it comes to saving, debt levels, risk tolerance and long term planning.

Then there are the gender differences.

Yes, these may sound like generalisations, but it is often very likely for males to eschew the fine print (i.e. not read the manual!) whilst women may be more likely to choose to absorb the detail and make decisions more slowly.

There are also very real differences in rates of personal wealth and salaries. The gender gap in income is well documented. It’s also exacerbated by the higher propensity of women to take ‘time out ‘to raise children, commit to other care duties or work in casual roles with fewer benefits.

And then there is the (also well documented) gender gap in retirement income. A recent finding from the Australian Institute of superannuation Trustees (AIST) published shows men, median super savings at age 55-64 is $183,000 whilst women have $118,556, about 65% of the amount for males. This gap is slowly, ever so slowly, narrowing, but it still presents a significant handicap for women who are trying to fund their later lives.

And on top of these differences, there is another one which may also have a profound effect on retirement income.

And that’s in the area of financial literacy.

Again, the news is not great for women.

So what is financial literacy and why should you care about your ranking?

ASIC defines financial literacy as ‘having the financial knowledge, skills, attitudes and behaviours necessary to make sound financial decisions’.

It’s not just a skill for today because retirement income is not a ‘set and forget’ proposition.

You will need this core life skill so that you can manage changing personal circumstances over a 25-30 year retirement, as well as understand evolving financial products and services.

Australian men and women’s financial literacy has been measured in a survey conducted by Household, Income and Labour Dynamics in Australia (HILDA) as part of a longitudinal survey covering 17,500 people across 9,500 households since 2001.

The survey asked five questions related to financial literacy, covering:

  • possible return on investments,
  • risk v returns,
  • inflation and
  • investment diversification.

Nationally, 50% of men answered all five questions correctly, whilst just 35% of women did so.

The report also correlated the personal wealth of those who answered well and found that low financial literacy was associated with poor financial wellbeing.

Enough of the bad news, here are some solutions.

If money is a sore point in your relationship, it is worth considering having a ‘money date’ on a regular basis, where you speak frankly, check shared budgets and goals, and the ways you might support each other to reach these goals. It beats simmering tension or arguments any day. Sometimes one partner is more able to absorb financial information than another. That’s fine, but if you want an independent ‘other’ to guide your planning you can make, an appointment with one of Retirement Essentials’ advisers that you can both attend and share ideas.

There is also a wealth of information both on our site and on the ASIC Moneysmart site so you can work your way through the basics. Every week Retirement Essentials explains the finer points of retirement income, offers case studies so that you can see the rules in action, and cross reference other articles or definitions in a jargon-free environment.

We also offer pension eligibility calculators which help you do your own sums at no charge whatsoever.

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