Financial illiteracy hurts women’s odds of narrowing wage gap

 Story by Katie Bane, NewsNetNebraska

Recent University of Nebraska-Lincoln graduate Christina Condreay regrets not taking a personal finance course during her time in college.

She graduated from UNL in December and quickly discovered it was a huge gap in her curriculum.  Personal finance wasn’t required for her journalism major, and she wishes she’d learned more about taking out loans, how they work and the requirements for paying them back.

“Someone needs to sit down and teach high school or college students how to pay for stuff,” Condreay said.  “I don’t want to live a life where I can’t get ahead.”

Experts say this lack of knowledge of personal finance among women is one of several factors that contribute to today’s wage gap between men and women workers. But the experts think college is the perfect opportunity for women to learn necessary financial skills and to take active steps to put their financial houses in order.

Experts first noticed a significant pay gap between men and women working similar jobs in the 1960s, when, on average, women made 59 cents per every dollar a man earned.  The Equal Pay Act was signed in 1963, and the National Committee on Pay Equity has tracked the narrowing gap since then.

Today, though, women still lag behind, earning on average 77 cents per every dollar a man makes.

In addition to a lack of financial knowledge, gender socialization also plays a significant role in why women don’t make as much as men, said Donde Plowman, dean of the College of Business Administration.

Donde Plowman

Donde Plowman

“Women often think it is ‘bragging’ to claim the credit they deserve,” she said.

Starting as early as elementary school, women learn to use language to maintain relationships while men use language to establish status, Plowman said.  Those values become ingrained and are often carried into adulthood.

Girls also learn the importance of sharing and teamwork when they are young.  At the same time, boys vie for leadership positions to gain social status.  Plowman said this teaches men to take credit for their work which can lead to faster promotions and pay increases.

“It is unrealistic to think that if we do a good job, others will notice and the things that we hope for will just naturally come our way,” Plowman said.  “We have to let others know what we want, what we aspire to.”

And the sooner women learn about and adjust their weaknesses the better.

Condreay said she wishes she knew the weaknesses in her education before graduating.  She wants to move to Maryland or Wisconsin and pursue a career in journalism but she needs to build a “savings pocket” before she can move out of her parents house.

Before graduating, she didn’t realize how the lack of savings would affect her life.

“[Saving] isn’t something you can just avoid … and I know people who are getting married out of college and that’s scary because how can they afford that and set up a household budget?” Condreay asked.

College offers a variety of opportunities for young women to learn good financial habits, said Donna Dudney, a UNL associate professor of finance. She recommends Finance 260, an online personal finance course that teaches students everything from managing stocks and bonds to purchasing insurance to balancing a checkbook.  Understanding the basics can be the most important part of a good financial life.

Donna Dudney

Donna Dudney

“If I go to a workplace and get a benefits package, I need to know how much to invest in a 401(k) and where I should allocate it,” Dudney said.  “The basics do matter.”

The Student Money Management Center is another good resource for students. It offers one-on-one money management sessions with qualified mentors and financial workshops throughout the year.  Financial advice also is offered online through workbooks, documentaries and games.

Looking into university services is a good first step for young women, but there are additional steps women can take, the experts said.

One of the most important is establish their own credit rating, Dudney said.

The easiest way women can build credit is by opening a credit or department store card in their own name, she said.  But she cautioned against opening too many accounts because that can hurt credit scores, too.

Joint credit is great when buying a house, but Dudney recommends that couples purchase big items like used cars and pieces of furniture under their individual names and pay them off on their own before making them joint assets.  This helps “control” credit ratings.

Also, Dudney said to remember to check credit ratings before buying a house or a car.

“Check your rating three to four months before you go in and get the loan,” she said.  “This leaves you room to negotiate and lets you know if people are establishing credit in your name.”

Credit scores from TransUnion, Equifax and Experian can be checked for free once every 12 months.  AnnualCreditReport.com combines all three and can be checked once a year as well.

Erin Wirth, program director at the Student Money Management Center, prepares for a day of advising students about financial issues.

Erin Wirth, program director at the Student Money Management Center, prepares for a day of advising students about financial issues.

Another critical life skill women should learn is negotiation, Plowman said.

“When we take a job offer that pays less than what we really think we are worth, over time that difference adds up to a lot,” she said.  “It may not seem like much at the time but if you stay in the job for 20 years, the difference is significant.”

Condreay learned the value of negotiation when she was offered a raise when she became a full-time employee at a bank.  Supervisors offered a $3 pay increase, which she gladly accepted until she later realized she “probably could have gotten more if I had negotiated.”

But she said she doesn’t feel like she has room to negotiate in the career she wants to pursue: journalism.  She has a limited skill-set and little outside experience.  She said she is also at a serious disadvantage because of the economy.

Plowman said there are ways to learn to negotiate even with limited skills.  Management 994 is a graduate program that teaches students negotiating skills.  The course is highly interactive and uses realistic negotiation practice to educate students.  The only catch is students must be graduate students to take the class.

For students interested in learning on their own, she said buying the book, “Getting to Yes,” by Roger Fisher, William Ury and Bruce Patton and following the authors’ advice was another great way to learn how to negotiate.

Finally, having a successful mentor is invaluable, Plowman said.  Watching someone else negotiate and asking for their advice will help women and students learn quickly.

Dudney said young women also need to make personal finance a priority.

“Choosing to concentrate limited time on less superficial things and read a book on personal finance will help (women) out better five years from now over reading ’50 Shades of Gray.'”

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