Gender and...

Gender and Finances militaryfamilieslearningnetwork.org/event/22051

1This material is based upon work supported by the National Institute of Food and Agriculture, U.S. Department of Agriculture,and the Office of Military Family Readiness Policy, U.S. Department of Defense under Award Number 2015-48770-24368.

Connecting military family service providers and Cooperative Extension professionals to research

and to each other through engaging online learning opportunities

militaryfamilieslearningnetwork.org

Dr. Barbara O’NeillFinancial Resource Management Specialist, Rutgers Cooperative Extension Outreach Coordinator,MFLN Personal Finance

Today’s Presenters

Dr. Martie GillenAssociate Professor,Department of Family, Youth and Community Sciences at University of FLPrincipal Investigator, MFLN Personal Finance

Part 1: What Does the Research Tell Us?

DariuszSankowski/Pixabay.com, CC0

Gender Differences and Stereotypes in Financial Literacy: Off to an Early Start

• Data suggest that stereotypical beliefs play a role in the formation of the gender gap in financial literacy among teenagers.

• They found no statistically significant knowledge differences between males and females who do not display biased beliefs related to financial literacy.

Source: Driva, A., Lührmann, M., & Winter, J. (2016). Gender differences and stereotypes in financial literacy: Off to an early start. Economics Letters, 146, 143-146. 5

2014 Teens and Personal Finance Survey

• Key findings of Junior Achievement’s 2014 Teens

and Personal Finance Survey reveal a gender gap

across numerous money-related topics.

– Specifically, boys and girls view budgeting, college plans,

and anticipating future earnings in very different ways.

Source: Junior Achievement. 2014 Teens and Personal Finance Survey. https://www.juniorachievement.org/documents/20009/36541/JA+2014+Teens+Personal+Finance+Survey.pdf/8ae8038d-f2bd-461e-9faa-23f1a6f19f58

Adults

Raxpixel/Pixabay.com, CC0

How Financially Literate Are Women? An Overview and New Insights

Source: Bucher-Koenen, T., Lusardi, A., Alessie, R., & Van Rooij, M. (2017). How financially literate are women? An overview and new insights. The Journal of Consumer Affairs, 51(2), 255-283. 8

• When asked to answer questions that measure knowledge of basic financial concepts, women were less likely than men to answer correctly and more likely to indicate that they do not know the answer.

• Both young and old women showed low levels of financial literacy.

• Moreover, women for whom financial knowledge is likely to be very important—for example widows or single women—also know little about concepts relevant for day-to-day financial decisions.

• The gender differences were present for very basic as well as more advanced measures of financial literacy.

Do these differences hold up when accounting for

differences in demographic and economic

characteristics between women and men?

– Controlling for these demographic and economic

characteristics hardly changed the estimates for the

gender gap.

– American women were still about 14 percentage points

less likely to give three correct answers.

Gender Differences in Personal Saving Behaviors

• Determinants of short-term and regular saving behavior were

found to differ by gender.

• Women (n = 702) were less likely to save in the short term if

they were in poor health, while poor health did not significantly

affect the short term saving of men.

• Having low risk tolerance negatively affected the likelihood of

women saving in the short term and saving regularly, while

each year of education made men (n = 469) more likely to

save in the short-term and to save regularly.Source: Fisher, P. (2010). Gender differences in personal saving behaviors. Journal of Financial Counseling and Planning. https://afcpe.org/assets/pdf/volume_21_issue_1/pattiejfisher.pdf 11

Gender Differences in Financial Risk Tolerance

• The results indicated that gender differences in financial risk

tolerance are explained by gender differences in the individual

determinants of financial risk tolerance, and that the disparity

does not result from gender in and of itself.

• The individual variables that moderate the relationship

between gender and high risk tolerance are income

uncertainty and net worth, with income uncertainty moderating

the relationship between gender and some risk tolerance.

Source: Fisher, P. & Rau, Y. (2017). Gender differences in financial risk tolerance. Journal of Economic Psychology, 61, 191-202. 12

Earnings

Nattanan23/Pixabay.com, CC0

• The pay gap is a comparison between women’s

and men’s typical earnings.

• It can be compared by weekly earnings or

annual earnings.

What Is the Pay Gap?

Source: American Association of University Women. (2018). The Simple Truth about the Gender Pay Gap. https://www.aauw.org/research/the-simple-truth-about-the-gender-pay-gap/

The earnings ratio and the pay gap for 2016 are calculated using

these formulas:

How Do You Calculate the Pay Gap?

Earnings ratio = women’s median earnings

men’s median earnings

Pay gap = [men’s median earnings – women’s median earnings]

men’s median earnings

= 80.47% = 80%

Source: American Association of University Women. (2018). The Simple Truth about the Gender Pay Gap. https://www.aauw.org/research/the-simple-truth-about-the-gender-pay-gap/ 15

Women’s Median Annual Earnings as a Percentage of Men’s Median Annual Earnings for Full-Time, Year-Round Workers, 1960–2016

The Pay Gap Over Time

The Pay Gap and AgeMedian Weekly Earnings, by Age and Gender, 2016

The Pay Gap and Race/EthnicityMedian Annual Earnings by Race/Ethnicity and Gender, 2016

The Pay Gap and Education

Source: U.S. Bureau of Labor Statistics. (2016). Women's earnings 83 percent of men's, but vary by occupation. https://www.bls.gov/opub/ted/2016/womens-earnings-83-percent-of-mens-but-vary-by-occupation.htm 20

Source: U.S. Joint Economic Commission. (2016). Gender Pay Inequality Consequences for Women, Families and the Economy. https://www.jec.senate.gov/public/_cache/files/0779dc2f-4a4e-4386-b847-9ae919735acc/gender-pay-inequality----us-congress-joint-economic-committee.pdf 21

• Women and men tend to choose different majors in college and to work in different occupations after college.

• Women tend to work shorter hours and require more flexible schedules, and women are more likely than men to care for children.

• Women experience gender bias and discrimination that are likely responsible for a significant pay gap, even after controlling for other factors.

What Causes the Gender Pay Gap?

• Few women ascend to the highest positions of leadership, which means losing out on pay.

• When women start working in an industry, wages in the industry fall, even for men.

• AAUW and other researchers have found that discrimination and bias are responsible for gender pay gaps of between 6 and 12%.

Gender Discrimination and Bias

The Effects of Gender on Family Finances

Omarmedinafilms/Pixabay.com, CC0

Source: U.S. Joint Economic Commission. (2016). Gender Pay Inequality Consequences for Women, Families and the Economy. https://www.jec.senate.gov/public/_cache/files/0779dc2f-4a4e-4386-b847-9ae919735acc/gender-pay-inequality----us-congress-joint-economic-committee.pdf

Schedules and Parenting• Women are more likely than men to work part-

time or take time out of the workforce.

• Employers still prefer “traditional” work schedules

with long, continuous hours.

• When it comes to having children, mothers

typically are paid less (the “motherhood penalty”)

while fathers typically are paid more (the

“fatherhood bonus”).Source: American Association of University Women. (2018). The Simple Truth about the Gender Pay Gap. https://www.aauw.org/research/the-simple-truth-about-the-gender-pay-gap/ 28

Older Adults

Silviarita/Pixabay.com, CC0

Social Security Retirement Benefits and Gender

• Despite the relative importance of Social Security for older

women, their benefits are typically smaller than men’s.

• Social Security benefits are calculated based on an

individual’s earnings history, but women generally have lower

pay during their working years and spend fewer years in the

paid labor force than men.

• As a result, the average monthly Social Security benefit for

female retirees is 79% of what it is for male retirees.

Pension Benefits and GenderWomen are less likely than men to

receive income from traditional

pension plans.

– Some are ineligible to

participate in employer-

sponsored retirement plans

because they do not meet the

minimum criteria for eligibility.

This may be the result of time

spent out of the workforce

caring for children and other

family members.

Women are also more likely to work in

jobs that do not offer retirement plans.

• Among those women who have

pension income, their income

tends to be smaller than men’s.

– This is due to the fact that

payments from these

retirement plans are typically

calculated based on a

worker’s tenure and salary

during peak-earnings years.

Military

Photo by Navy Petty Officer 3rd Class Chris Roys, Defense.gov

Military Earnings

• Service members typically earn more than civilians with a comparable level of education.

• Moreover, they receive many other benefits that civilians often do not, including housing allowances, subsidized child care, tuition assistance, and top-of-the-line comprehensive health care.

• From 2000 to 2010, the average increase in regular compensation, adjusted for inflation, was 40% for enlisted members and 25% for officers. – Over the same period, inflation-adjusted civilian pay fell by

between 4 and 8%.

Source: Hosek, J. & Wadsworth, S. (2013). Economic conditions of military families. The Future of Children, 23(2), 41-59.

Military Earnings• Military pay, based on pay tables for enlisted personnel and

officers alike, is the same regardless of race and gender.

• For women and minorities, then, military pay looks even better

relative to civilian pay.

• By the same token, women and minorities who leave the

military and take a civilian job are likely to see their wages fall

even more than white men would, and the change in their

families’ economic circumstances might be more marked.

Source: Hosek, J. & Wadsworth, S. (2013). Economic conditions of military families. The Future of Children, 23(2), 41-59. 38

Military Spouses• Compared with civilian wives with similar

characteristics– Military wives are less likely to work and more likely to be

unemployed; they work fewer weeks each year and fewer hours each week; they are paid less; and they move more frequently.

– Military wives are more likely to work part-time when they would prefer full-time work, and they are more likely to be overeducated for the job they hold.

• Similarly, military husbands are more likely to be unemployed, earn less, and move more frequently than comparable civilian husbands.

Military Spouse Earnings• The annual earnings of female military spouses who are

married to active-duty service members and who worked

during any given year were about 14% less than those of

comparable civilian spouses.

Military Spouse Employment During Deployment

• Spouses are less likely to work when a service member

is deployed.

• Moreover, spouses’ participation in the labor force fell

several months before deployment and did not rise again

until several months after.

• However, if spouses continued to work during

deployment, they saw almost no change in wages and

hours.

Source: Hosek, J. & Wadsworth, S. (2013). Economic conditions of military families. The Future of Children, 23(2), 41-59. 41

Part 2: What Women (and Men) Need to

Know About Money

Free-Photos, Pixabay.com, CC0

What special financial challenges do many women face vs. men?

Gender Finance Differences

• Women live longer, on average

• Women earn less, on average

• More likely to have “gaps” in employment

• Most severe divorce and widowhood impacts

• Many women lack financial experience

Financial Basics

StevePB/Pixabay.com, CC0

Managing Household Cash Flow on a Lower Average Income

• Relationship between income and expenses– Positive cash flow– Negative cash flow

• Ways to improve cash flow– Increase household income– Decrease household expenses– Do both

Insurance Basics

Geralt/Pixabay.com, CC0

People Manage Financial Risks in Five Ways:

• Do nothing and hope

for the best

• Risk avoidance

• Risk reduction

• Risk acceptance

• Risk transfer

(insurance)

Source: Personal Finance (2017), Garman & Forgue 49

General Insurance Tips

• Insure for major losses

• Choose a highly rated insurance company

• Select the highest deductible you can afford

• Pay premiums annually or semi-annually

• Avoid duplicating coverage

• Ask about available discounts

• Follow “The Rule of Three”

Life Insurance

• Protects against loss of earner’s income

• Provides money for a homemaker’s services

• Factors to consider include:

– Current assets and debts

– Earning power of surviving spouse

– Other sources of income and assets

– Projected expenses

Disability Insurance

• Covers income loss from inability to work

• Maximum coverage: 60%-70% of gross pay

• Particularly important for self-employed

• Key factors:

– Definition of disability

– Own Occupation

• Any Occupation

• Waiting period

Umbrella Insurance Tips

• Buy required underlying coverage

• Review non-profit board service and libel coverage

• Check exclusions (e.g., overseas or business

coverage)

• Check “bundled” property coverage with one

insurer

Long Term Care (LTC) Insurance

• “LTC” can mean a wide range of services:

• Home health care

• Assisted living

• Nursing home care

• Three ways to handle risk of LTC costs:

1. Retain it (self-insure)

2. Avoid it (no guarantees)

3. Transfer it (LTC insurance)

Any other important insurance tips?

Investing Basics

FirmBee/Pixabay.com, CC0

Understanding andAccepting Investment Risk

All investments involve some risk:

• Market risk- Security prices affected by stock market

• Interest rate risk- Inverse relationship: bond prices and interest

• Inflation risk- Loss of purchasing power

• Business risk- Affects only one company/industry

• Reinvestment risk-Having to invest at lower rates

Investment Risk Tolerance: Are Women More Conservative Investors?

• Conservative

• Moderate

• Aggressive

Source: http://pfp.missouri.edu/research_IRTA.html

Public Doman Pictures- images/Pixabay.com, CC0

Low-Risk Investment Choices: Ladder Rung 1

Cash and Cash Equivalents

– Savings accounts

– Money market deposit accounts

– Money market mutual funds

– Certificates of deposit (CDs)

U.S. Treasury Securities

– EE bonds and I bonds

– Treasury bills, Treasury notes, and Treasury bonds

Fixed Annuities61

Low- to Moderate-Risk Investment Choices: Ladder Rung 2

Individual bonds -- rated A or better

– Municipal bonds

– Corporate bonds

– Zero-coupon bonds

– Bond funds

– GNMAs (mortgage-backed securities)

Moderate to High Risk Investments Choices: Ladder Rung 3

• Stocks (a.k.a. equities)

– Blue chip stocks

– Growth stocks

– Value stocks

• Stock mutual funds

• Variable annuities

High Risk Investment Choices:Ladder Rung 4

• Small company stocks and mutual funds

• Sector funds

• Emerging market funds

• Gold and precious metal funds

• Penny stocks

• Commodities

• International stocks and mutual funds

Investing for Retirement

Geralt/Pixabay.com, CC0

Rule of 72• Tells how long it takes to double money if you know/assume

the interest rate earned

– Divide years into 72 to get time frame

– Example: 72/8 (% interest) = 9 years

• Tells you the interest rate needed if you know/assume a time frame

– Divide time into 72 to get interest rate

– Example: 72/9 (years) = 8% interest

• Rule of 115- Tells how long it takes to triple money (solve for interest rate or time period like Rule of 72)

Develop a Personal Investment Policy Statement

Planning for Future Life Events

Alessandraamendess/Pixabay.com, CC0

Key Takeaways

• Prepare will, living will, and power of attorney

• Make sure asset titles don’t conflict with will

• Review beneficiary designations periodically

• A certainty of life is changed relationships

• Take your time with major financial decisions

• Divorce may require painful financial adjustments

• Use “I” messages to communicate about money69

Evaluation and Continuing Education Credits

MFLN Personal Finance is offering 1.5 CEUs for today’s webinar for AFC- and CPFC-credentialed participants.

Please complete the evaluation and post-test at:https://vce.az1.qualtrics.com/jfe/form/SV_8v8nb7Wu9I3UYHX

Must pass post-test with an 80% or higher to receive certificate.

Upcoming Event

Insurance Principles & Resources: What Financial Practitioners Need to Know

• Tuesday, June 18, 2019

• 11:00 am – 12:30 pm Eastern

• RSVP: militaryfamilieslearningnetwork.org/event/22064/

For more information on MFLN Personal Finance visit:militaryfamilieslearningnetwork.org/personal-finance 71

militaryfamilieslearningnetwork.org

Gender and...

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