Financial literacy and wellness among U.S. women: Financial literacy among under-represented minority women

Personal finance knowledge tends to be lower among underrepresented minority women—African American and Hispanic women—compared with their white peers. The former correctly answered 38% of the index questions, on average, and the latter 54% (Figure 7). This is analogous to financial literacy levels among the entire U.S. adult population—underrepresented minorities correctly answered 38% of the index questions, on average, while their white peers correctly answered 58%.

2020 P-Fin Index Figure 7
Source: TIAA Institute-GFLEC Personal Finance Index (2020).

In terms of functional knowledge, underrepresented minority women answered less than one-half of the index questions correctly in each of the eight areas (Figure 8). Beyond that, financial literacy is particularly low in some areas. African American and Hispanic women correctly answered 28% of the insuring questions, on average. One-third of the questions in the areas of investing, comprehending risk, and go-to information sources were answered correctly.

2020 P-Fin Index Figure 8
Source: TIAA Institute-GFLEC Personal Finance Index (2020).

Borrowing and debt management, as well as consuming, are the areas of greatest personal finance knowledge among underrepresented minority women, with approximately one-half of the questions in each answered correctly on average. Borrowing and managing debt often begin relatively early in life. Thus, knowledge and understanding can emerge from experience tracing back to relatively young ages.

Comparisons of functional knowledge among underrepresented minority women with their white peers are noteworthy along several dimensions. Financial literacy is notably lower among underrepresented minority women in seven of the eight functional areas, with the difference in percentage of correctly answered questions ranging from 11 to 22 percentage points (Figure 8). Comprehending risk is the lone area where functional knowledge is equal across the two groups; nonetheless, it is a relative weakness for both with only one-third of the questions answered correctly on average. In fact, it is by far the lowest area of financial knowledge among white women. In contrast, the area of lowest financial literacy among underrepresented minority women—insuring— is also the area with the biggest gap. Comprehending risk and understanding insuring are particularly important during a crisis with tremendous health and economic consequences like the current one.

A more rigorous empirical analysis confirms these findings. The regression results presented in Table 1 show that financial literacy tends to be lower among African American and Hispanic women relative to their white peers, even with controlling for other socioeconomic factors such as household income and education. While age, education, and income also have a statistically significant relationship with female financial literacy levels, marital status and the presence of children under the age of 18 do not after controlling for other variables.

2020 P-Fin Index Table 1
Source: TIAA Institute-GFLEC Personal Finance Index (2020).

Notes: Estimated regression coefficients are compared to the following baseline values: Age category 18–29 for the age variable, household income of less than $25,000 for the income variable, having less than a high school degree for the educational attainment variable, being married for the marital status variable, and unemployed/disabled/retired for the work status variable. Robust standard errors in parentheses: *p<0.10, **p<0.05, ***p<0.01.

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