I have a confession. Unlike most teens, I did not have a rite of passage of getting my driver’s license when I turned 16. No matter where you grew up, getting your driver’s license was the symbol of freedom – it was a big deal. As we watched in Clueless, failing your driver’s test was a major setback in terms of growing up and in establishing your independence.
Because of my family’s perception of driving as a dangerous endeavour, when I turned 16, I didn’t even try to get my license, and for the next 10 years, I denied the lack of a driver’s license was limiting my independence.
Nowadays, I hear the same denials from many women – only not in terms of driving, but in gaining financial literacy. They feel overwhelmed. The terms are confusing. They’ve seen other people lose money on the stock market. They are afraid of making a mistake.
Women have been socialized to believe the same about investing that my family had about driving: Financial literacy is a skill few can master. As a result, many women have the same response I did – to give up before even trying.
My friends who are professional women leave their money management to others. One friend couldn’t make a contribution into her TFSA without checking with her father first. He managed her money because according to her, he was “better at it”. Another friend had no idea if her and her husband had an emergency fund or how much was in it because he “handles these things”.
When I hear this, I have flashbacks to conversations with my friends where I justified not learning to drive. And you know what? I almost fooled myself… except for that time I couldn’t go to IKEA to pick up a small piece of furniture, or the time I couldn’t attend my friend’s wedding in cottage country because I couldn’t drive myself.
Without learning how to drive, I couldn’t confidently say I was independent, and I argue the same for those who are not financially literate. They are not in the drivers’ seat when it comes to their money.
So why is financial literacy important? Here are five key reasons.
1. We are spending more and more time being single.
My mom grew up in a generation where it was the norm to marry well before 30 and divorce was shameful. In fact, by the time my mom was 30, she already had two toddlers, and like many women of that era, she let my dad handle all the investing while she oversaw how much we spent at the grocery store.
We simply can’t employ the same model as our parents’ generation of letting our partner take care of the finances. Some of us will never marry, and that’s completely fine. That doesn’t dictate our capabilities when it comes to managing our funds, and investing for our goals and retirement.
2. Women are becoming the breadwinners.
Women are completing both university and post graduate degrees at a faster pace than their male counterparts. This increases the career opportunities available for women. In the 1960’s, the percentage of female breadwinners hovered just under 10%, now, that percentage has jumped to 40%. And where women are not out earning their husbands, their salaries have increased dramatically. Today, over half of management and professional positions are now held by women. We are climbing corporate ladders, but data shows that we are not climbing wealth ladders. Women invest 40% less than men. So, not only is there still a wage gap, but there is an investing gap.
3. Women are going to control over 50% of all wealth.
Yes, you read that right – 50%. Due to demographic changes that have long been in motion, during our lifetime, women will control the majority share of wealth. The dollar amounts are staggering: up to $22 trillion by 2020 and another $28 trillion due to inheritances.
Trillions. 12 zeros. That’s a million million. Are you ready?
4. The #MeToo movement.
Events over the past two years have highlighted the difference between women who have financial resources and those who don’t. While sexual harassment and assault knows no socio-economic boundaries, those who are financially secure could take action. Hollywood actresses could choose to refuse projects that put them in uncomfortable working environments, as they were financially stable.
But what about us average women? I mean, I need my job. I can’t afford to never work again. But by being financially literate, and by having a good grasp of my finances, I can decide to walk away from an abusive boss or toxic work environment. By not taking control of our financial security, aren’t we leaving ourselves a bit… vulnerable?
5. Equipping the future generation.
When I was in grade 6, my classmate said something about his parent’s “portfolio” and something about “stocks”. I had no idea what he was talking about, but I knew my parents didn’t have these things. My school was filled with sons and daughters of doctors, lawyers and corporate executives. My parents ran a Chinese restaurant. There was no question whose parents were “better off”.
My parents were not able to help me build wealth beyond ensuring I got good grades at school. When we talk about the advantages that privileged kids have, some are tangible like access to private tutors or dance lessons, but equally, some are intangible like a 6th grader knowing what a stock is. I want to give the next generation that kind of advantage.
At 26, I finally bought my first car and got my driver’s license. I finally learnt what all the terms and symbols meant. There were times I felt overwhelmed as I was merging onto the highway. I made miscalculations and mistakes while parking. My car got scratches, I ran curbs. These are the normal ups and downs of learning something new. There was a time when driving was new to all of us. Perhaps financial literacy is new to us now, but we have proof we can learn the terms, conquer overwhelm, and recover from mistakes.
Imagine feeling confident that you know exactly where you are and where you are going with your money. I image it as that same exhilarating feeling of independence on your first solo drive. So it’s time to get in the drivers’ seat of our finances and start driving.