Financial literacy and wellness among U.S. women: Discussion
Financial literacy is knowledge and understanding that enable sound financial decision making and effective management of personal finances. In times that are anything but normal—like today with the COVID-19 pandemic and its severe economic consequences—the ability to make appropriate financial decisions matters greatly.
Unfortunately, many Americans are functioning in today’s environment with a poor level of financial literacy. This is more true among women than men, and more true among underrepresented minority women than their white peers. Especially problematic in today’s environment is the finding that financial literacy is particularly low in the area
of comprehending and understanding risk and uncertainty. On average, U.S. women correctly answered only one-third of the index questions related to risk and uncertainty. The same holds true among African American and Hispanic women. This means that individuals are ill-positioned to make decisions in a time when uncertainty and volatility dominate economic and financial life.
These findings highlight points on which to focus as the United States eventually moves forward from the pandemic and its economic consequences. Better financial well-being is related to greater financial literacy. This holds for all women, including underrepresented minority women. A heightened focus on improving financial literacy, with an emphasis on understanding and managing risk and uncertainty is an important step that will increase Americans’ financial resiliency in the future. While not a cure-all, increased financial literacy can lead to improved financial capability and practices that benefit even those with relatively modest resources.