Tackling college loans, grants, and other forms of financial aid is one of the first financial challenges a young person faces in their adult life. Unfortunately, many young people are unprepared to take on this responsibility, as they lack the financial literacy to make informed, smart borrowing decisions.
On top of that, women (disproportionately from men) find themselves at a distinct disadvantage when it comes to financial literacy.
With incomes still lagging behind, and a lengthy history of gender inequality unfolding day by day, many women are missing out on the financial education that could empower them and their families to build economic stability.
To combat this disparity, colleges can play an important role in providing young women with sound knowledge about money management – through resources like dedicated courses and practical advice from mentors or faculty members.
With the right access to educational tools and experienced guidance, female college students can be equipped with essential skills going into their professional lives.
Read on to learn more about the gender gap in financial literacy, the consequences if things go unchanged, and how colleges, in particular, are in an ideal position to help close this gap.
Disparities In Financial Literacy
As previously mentioned, an overwhelmingly large number of young people enter the adult world with very little financial education.
Next Gen Personal Finance found in their 2022 State of Financial Education Report that only 22.7% of U.S. high schoolers had taken a standalone Personal Finance course by the time they graduated – partially due to the fact that at the time, only eight states guaranteed these classes were available.1
If these students go on to receive a higher education, they’ll be faced with financial issues such as paying off student loans and understanding credit scores – can they make an informed decision without this basic knowledge?
The Student Voice Survey (courtesy of Inside Higher Ed, College Pulse, and Kaplan) interviewed 2,000 undergraduate students about their confidence in their own financial literacy.
Over 50% of men answered that their financial knowledge was either “excellent” or “good,” whereas only one-third of women reported similarly. Less than half of the women who participated in the survey had done any personal research on financial topics, and on average, spent little time discussing investing.2
This disparity in financial literacy continues into adulthood and outside of the United States, too. The National Bureau of Economic Research found that internationally (focusing their study primarily in the United States, the Netherlands, and Germany), men were consistently more knowledgeable about finance than women.3
The data is clear, but a few questions remain: What does this gender gap in financial literacy mean for young women? And more specifically, how can colleges help bridge the divide?
Consequences of a Financial Literacy Gap
The consequences of a gender gap in financial literacy are wide-ranging and overarching. The National Financial Educators Council (NFEC) reported that those with low financial literacy see lower savings and higher debt and bankruptcy rates due to their limited knowledge.4
The NFEC also confirmed that wealth gaps that already exist between marginalized people will grow.
It’s not unreasonable to say that the disparity between men’s and women’s wages will also increase, as a result.
Back at the college level, young women often take on more loans than necessary because their lack of financial literacy puts them in a poor position to make any borrowing decisions.
In fact, the Education Data Initiative found that women are more likely to carry larger amounts of debt, despite also having a 26% lower income.5
Young women leaving college and entering the workforce without basic financial skills are at a growing disadvantage. Their wages will likely be disproportional to their male peers, and they may struggle to build wealth or even put aside money for retirement due to their lack of knowledge surrounding investing.
Without intervention, this gender gap in financial literacy will cause more economic struggle for women, perpetuating existing gender disparities.
Enhancing Educational Opportunities
The consequences of maintaining a low financial literacy standard in young women are obvious: the status quo will lead to greater economic disparities, pay gaps, poverty risk, and more.
Thankfully, universities are uniquely situated to help their students create a healthier financial future with college-level financial education.
An ideal place to start may be instituting Financial Literacy courses as a required “General Education” credit for all majors on college campuses. Topics today range from payroll deductions, interest rates, public benefits (such as 401Ks), loan application processes, and debt repayment plans – essentials necessary to ensure students are financially savvy.
Colleges can also offer on-campus female mentors ready to serve as a reliable source of advice and guidance about money management topics. These role models should come from within or outside the university – such from established banks – and be made available for students to discuss practical tactics related to managing income, settling student loans, or other debt payments.
Another helpful tool universities can incorporate into both classroom curriculum and student loan counseling is iGrad’s Financial Literacy Platform.
The platform’s financial education services can help empower universities to provide students with the knowledge and skills needed for a better understanding of money management, budgeting, saving, and investing.
iGrad’s Financial Literacy Platform is highly customizable and can be integrated into existing campus systems and websites for ease of access.
Many colleges are attempting to tackle this issue in alternate ways, as well. Some examples include:
- Offering specialized courses dedicated purely toward teaching personal finance to women
- Inviting external organizations specializing in money management education to host workshops or seminars
- Creating special scholarships geared toward encouraging financial literacy
Closing the Gap
By crafting courses and resources designed to specifically fill in knowledge gaps around the unique financial challenges women face, universities have a powerful tool at their disposal for closing gender divides.
Colleges should take full advantage of delivering useful financial literacy content that allows female students to learn how to avoid common pitfalls while confidently tackling their postgraduate lives.
1 – https://d3f7q2msm2165u.cloudfront.net/aaa-content/user/files/Files/NGPFAnnualReport_2022.pdf
2 – https://reports.collegepulse.com/financial-wellness
3 – https://www.nber.org/papers/w20793
4 – https://www.ifac.org/knowledge-gateway/contributing-global-economy/discussion/cost-financial-illiteracy
5 – https://educationdata.org/student-loan-debt-by-gender
