April is financial literacy month.
Unfortunately, American society lacks in this area.
Our schools do not teach this subject thoroughly enough and as a result many families face more stress and a lower standard of living than is necessary. Financial pressure is a major factor that leads to divorce and family discord. Children raised in stronger home financial environments learn these skills from their parents and often do better in school and therefore have better lifelong outcomes.
Although the lack of financial literacy hurts everyone, it is probably even more important for women.
For a number of reasons, women often bear more financial burdens than men. They are often the ones who take care of the children and bear more responsibility for their children and parents. It takes a lot of time. This sometimes reduces time spent in the workforce to accrue Social Security benefits, pensions, promotions, and 401k balances. Sometimes this translates into lower wages and benefits at work.
Currently, there are more women than men attending university. While this is promising for future earnings, a chilling fact is that women now own two-thirds of student debt. There are several reasons for this. When they enter the labor market, they are often paid less, so it takes them longer to repay their loans, which costs them more interest. A recent report from student loan refinance company Laurel Road indicates that one of the reasons women carry more debt is because they don’t understand how the system works.
Financial literacy can help improve this situation.
Divorce is a situation that affects many American families. If lack of money is a major cause of divorce, running two households is more expensive than running one. If both spouses were not involved in the financial decision making, this becomes a major concern during a divorce.
The loss of a spouse is hard on everyone. Not only emotional problems, but also financial problems can be devastating. Most often, it is the woman who loses her spouse. Indeed, they often marry a man a few years their senior and women of the same age often live four to six years longer than men.
On the first death, almost all families experience a loss of income. A social security benefit will be lost, and possibly retirement income. Most survivors receive 50% of the initial monthly income from a pension. While incomes take a hit, living expenses don’t halve. In fact, they’re probably only down about 15%. This is because you still have to pay property tax, utility repairs, and many other expenses, regardless of how many people live in the house. You may even need to hire someone to do the chores that were done by the deceased.
Studies have shown that a 65-year-old couple will spend around $240,000 on health care expenses in the last phase of their life. Women will account for approximately $130,000 of this total. Part of this expenditure results from the increase in life expectancy. This figure does not include long-term care expenses. If you visit a nursing home, about 85% of the residents are women.
Decisions made decades earlier can have a major impact on future life. Knowledge is power. Take steps to improve your financial literacy and your family will be rewarded for years to come.
The benefits are worth it. We’ll discuss another way to increase your family’s financial literacy in upcoming columns this month.
Your Financial Future is authored by Certified Financial Planner Gary W. Boatman, MBA and CFP, who also wrote the book Your Financial Compass: Safe Passage Through The Turbulent Waters of Taxes, Income Planning and Market Volatility.