By Muna Onuzo
Reports of business organizations and individuals going into financial distress after having acquired enormous wealth are too numerous to mention. From stories of personal financial mismanagement like that of Mike Tyson, to chilling tales of large scale fraud in trusted institutions like Enron, it is clear that no individual or company is immune to the consequences of financial negligence or outright disregard for the rules of money management. A major part of managing finances is the ability to make the right investments at the right time. In the aftermath of the Enron scandal, shareholders lost $74 Billion, thousands of investors lost their retirement accounts, and many employees lost their jobs. The important lesson to take from the experiences of those who have gone bankrupt is that no matter how much income a person or business makes, there is a possibility of losing it all if it is not well managed.
Financial literacy is the possession of the knowledge and an understanding of financial matters. Financial literacy often entails the knowledge and ability to make logical and well reasoned decisions pertaining to certain personal finance areas like real estate, insurance, financial investments savings, tax payment and retirement planning. Added to these is the ability to understand financial concepts like compound interest, financial planning, advantageous savings methods, consumer rights, currency rates, economic trends and time value of money. A fair understanding of most of these concepts can mean the difference between sustained wealth and business failure. Often times, individuals who are within the same earning bracket can find themselves in very different circumstances due to the application or non-application of financial literacy tools in their personal lives.
Financial literacy experts have devised several quick tests to determine whether individuals can be classified as financially literate or not. For instance, suppose you have N100 in a savings account that is earning 2 percent interest a year. After five years, how much would you have earned? Do you know the difference between an asset and a liability? Can you prepare a proper balance sheet to assess your income and expenditure? Do you know what bills, notes and bonds are? Is it wiser to save your money or to invest it in either of these? If you fall within the ranks of people who do not know the answer to at least one of these questions, take heart. You are not alone. In fact, you are among the majority. A survey conducted by Gallup, GFLEC, and the World Bank, concluded that two-thirds of adults world-wide are not financially literate.
The concept of financial literacy cannot be divorced from literacy as a whole. This is simply because it takes someone who can read and write to be able to decipher financial statements and understand their ramifications. Global literacy rates provide an interesting picture. As at December 2015, fifty-eight million children of primary school age are out of school worldwide. More than half of these are girls and nearly three quarters live in sub-Saharan Africa and in Southern Asia. Globally, an estimated seven hundred and eighty one million people aged fifteen and above are illiterate. Nearly two thirds of them are women, a proportion that has remained unchanged for two decades. The corresponding effect of this is that women are less financially literate than their male counterparts. In June 2014, the Wall Street Journal reported that men are more prone to know a little more about financial literacy, and that women know even less than men about the subject. In the study, people in the U.S., Germany and the Netherlands, were asked three multiple-choice questions. In the U.S., only 38% of men got all three questions right. The American women did even worse, with only 22% scoring three out of three. The other countries showed a similar pattern. Being that this study was conducted in the developed world where the disparity in education between men and women is lower, we can only expect that the current state of financial literacy among women in Africa will be even worse. In a study of over six thousand respondents from Abuja, Kano and Lagos, the research department of the Nigeria Deposit Insurance Commission found that the female gender under- performed the male gender in all domains of financial literacy. But why is this so and why is it important that this trend be reversed?
In Africa, the role of women in society is ever increasing. In more rural settings, women tend to play the traditional homemaker role. While most women in these areas are actively involved in productive activities such as farming and trading, the bulk of the family income and power to make financial decisions still comes from the men. Traditionally, women are not allowed to inherit property from their fathers. Certain legal and religious limitations have also conspired to practically sideline African women. While educated and successful women are on the increase, women are still expected to play the role of caregivers in the family setting. This proliferation of roles means that having a successful career is not generally accepted as a substitute for being a successful wife and mother. While modern influences are increasingly having an effect on the way society sees women and even on how women see themselves, it seems that the role of nurturer is one that many women cannot escape.
However, the position of women in the home and in society can be harnessed in a positive way regarding the issue of financial literacy. First of all, women need to be financially literate for themselves. Financial literacy creates a pathway to sustainable financial independence that can empower a woman to be self- sufficient. The result of this is that the woman becomes an asset to those around her rather than a liability. There is a great deal of respect that comes from a financially stable woman being able to hold her own irrespective of what the people in her life are able to provide for her. Such women become role models and occupy a place of respect in society. Their voices and opinions are valued and appreciated.
With the economic demands of 21st century life, women are increasingly pulling their weight financially in the family. This is commendable because an overdependence on partners for financial sustenance has been identified as one of the reasons why women tend to stay in abusive relationships. A Time Magazine online study revealed that many victims of domestic abuse, who shared their stories, said they feared they would be homeless or live in poverty if they left.
Even in non-abusive relationships, there is still the possibility of a separation, a divorce or the sudden death of a partner. Widowhood in Africa comes with certain burdens and restrictions which can be difficult to bear, particularly for a woman who is not financially literate. Many who have left all the financial decisions to their husbands have been short-changed in divorce settlements simply because they had no idea what their spouses owned. Some lacked the capacity to understand financial statements even when presented to them. Many have lived under a false sense of security, only to find, after their spouses’ deaths, that the family had accrued a mountain of debt and had been living beyond its means. While it is the hope of most women to have a happy, balanced marriage where they live in bliss and prosperity with their spouses, it is always important for them to be aware of the financial state of things. This will enable the woman to contribute ideas that will ensure that the family has a plan for the rainy day.
Also, as a homemaker, the woman has the responsibility of managing some vital aspects of everyday life in the home. According to Forbes.com, Women drive 70-80% of all consumer purchasing, through a combination of their buying power and influence. The woman is usually the one who goes to the market and witnesses first-hand the way changes in the economy affect the prices of goods and services. In most settings, a woman is likely the gatekeeper to her household’s expenditures. She is usually charged with the responsibility of deciding how family resources are allocated, giving priority to needs over wants. A financially literate woman is in a more advantageous position to carry out this task.
Another very unique and strategic fact about women is that they are the primary influence on the children. Traditionally, children learn a lot of moral and behavioral codes from their mothers. Numerous studies have been carried out to determine the extent to which the level of the parents’ general knowledge influences their children. One of these studies found that parental education affects children’s aspirations for their own education as well as their actual educational achievement all the way through adolescence. From this, it will be logical to conclude that a mother who knows how to manage finances will be a positive influence on the children. Women may be the key to transferring information about financial literacy to future generations.
Financial literacy is not a stagnant concept, but one that continues to evolve. As times change, the economic realities and indices through which people can be described as financially literate will also change. This means that it will take continuous effort to stay in touch with the current trends. In Nigeria, there have been efforts by some women’s groups to spread the word about the importance of financial literacy for women. Women empowerment has become a strong rallying point, which almost all local stakeholders believe is key to sustainable development. What is needed now is a practical and sustained effort to help Nigerian women reach financial independence; which is the goal of all financial empowerment efforts.
Pearls and Purpose© is one of such empowerment groups set up to bridge the financial literacy gap in women. Its purpose is to educate women on the benefits of effectiveness, branding, savings and personal finance management. It is a platform where women will learn not to be afraid but to trust that they have the ability to make, manage and multiply wealth. The Pearls and Purpose community focuses on teaching women perseverance in business and life, patience, discipline, accountability, spirituality, branding and personal effectiveness, and finally finance in a non-financial way.
To be a part of this community or engage them to facilitate financial literacy and personal effectiveness projects within communities or organizations or to empower your team with tools needed to succeed in business and life, contact the regional coordinator on 09056672929 or email iam@munaonuzo.com.
Muna is an Entrepreneur, speaker, start-up coach, communication & business etiquette expert as well as women advocate
