David Lerner Associates: How to Close the Financial Literacy Gap

David Lerner Associates: How to Close the Financial Literacy Gap

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According to several recent studies, there may be a significant “financial literacy gap” in the U.S. when it comes to how much men and women understand personal finances. One of these studies, for example, determined that there is now an average gender gap between men and women of 15 percent when it comes to financial literacy. This is up from 12 percent one year ago.

The study—which was conducted by Financial Finesse, a financial education company that conducts research on financial trends—asked survey respondents to answer a number of financial wellness questions in such categories as investing, money management, tax planning and insurance.

One of the most concerning findings of this study is a reversal in what was a positive trend with regard to women paying off credit card debt. Between 2009 and 2011 women made steady progress in paying off credit card debt in full, but this trend changed course earlier this year.

To help close the financial literacy gender gap it's recommmended that women focus on increasing their financial knowledge and understanding in the following four areas:

1. Budgeting— It all starts with creating a household budget that determines the total amount of monthly income and then subtracts total monthly expenses. Expenses can be broken into essentials (like mortgage or rent, utilities, transportation and groceries) and non-essentials (like eating out, going to concerts or movies, buying big-screen TVs and new computers, going on vacation, etc.). If there’s any money left over after expenses are subtracted from income, this can be saved or invested.

2. Saving and investing— This is one of the areas of the Financial Finesse study where there was the greatest gender gap. saRember that saving and investing aren’t the same thing: The former involves putting extra money away in a safe vehicle, like a bank savings or money market account or a money market mutual fund, while investing involves putting money into stocks, bonds and other vehicles that may earn a return, but also run the risk of loss of principal.

3. Life insurance— In the Financial Finesse study, a lower percentage of women than men said they carry enough life insurance to replace their income, pay for college expenses and create an emergency fund for their beneficiaries. There are two primary types of life insurance: term and whole life. With term, a woman buys a specific amount of insurance coverage for a specific period of time at a pre-determined price. With whole life, a portion of the premium paid goes into an investment account, while the remaining amount goes toward the insurance component.

4. Retirement planning— As defined contribution plans (like 401(k) plans) replace defined benefit plans (like pension plans) at many employers today, more women are responsible for saving for their own retirement. However, the government has made a number of tax-advantaged retirement savings tools available to help, including 401(k)s, traditional and Roth IRAs, Simplified Employee Pension Plans (SEPs), and 457 and 403(b) plans.

Women must take the initiative to establish and fund these retirement plans themselves. The good news for women is that, according to the Financial Finesse study, women are just as likely as men to do so. Ninety-two percent of women in the study said that they participate in their company’s retirement plan, which is slightly higher than men (91 percent).

Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates,Inc. (DLA). This material does not constitute an offer or recommendation to buy or sell securities and should not be considering in connection with the purchase or sale of securities. Member FINRA & SIPC.


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Founded in 1976, David Lerner Associates is a privately-held broker/dealer with headquarters in Syosset, New York and branch offices in Westport, CT; Boca Raton, FL; Teaneck and Princeton, NJ; and White Plains, NY.

For more information contact David Lerner Associates 877 367 5960 http://www.davidlerner.com

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Jake Mendlinger
Account Manager
516.829.8374 X 232

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