I recently read about a divorcing couple who met with a mediator, only to be told that mediation would not be the best option for them. Later, when pressed, the mediator offered several reasons why she was reluctant to take them on as clients. But the factor that seemed the most significant to me was the divorcing woman’s discomfort talking about money and her lack of basic financial literacy. Was the woman in this case a recent immigrant and unfamiliar with North American ways? Was she uneducated? Was English her second language? You might be surprised to hear that she was a highly educated (Ph.D.), middle-class, native-born American.
But then again you might not be surprised. A recent survey by the Globe and Mail of 800 of their (presumably educated and sophisticated) readers, found that only 29% of women and 53% of men said that they were “absolutely” financially literate. When the woman in the case I’ve mentioned reflected on her situation, she found that she had gradually let her husband take over the family’s money management. There was nothing sinister about this – she disliked having to think about such things, he enjoyed working with numbers, and she felt that he would do a better job. But this meant that when they decided to divorce she was a bit lost. She had to pick up money management skills at the same time as she was trying to cope with the stress of divorce and the added burden of being a single parent.
The Canadian Task Force on Financial Literacy defines “financial literacy” as having the knowledge, skills and confidence to make responsible financial decisions. While everyone should be knowledgeable about their money and able to make good decisions, the costs of financial illiteracy are particularly high for women, who still tend to earn lower salaries than men.
How can you become financially literate if you’re not? If you aren’t already familiar with your family’s financial situation, get better acquainted with it. As a minimum, you should know the amount of your monthly rent or mortgage payment, your monthly cost of living, how much money you’re setting aside for savings each month, the outstanding balance on your credit cards, and how much you’re paying in interest. You can get more familiar with your financial situation by taking on some money management tasks each month: pay the utility bills, make the mortgage payment. Get involved the next time you renew your mortgage. Sit down with the person who handles the family finances and have him or her go over the basics with you. If you’re handling finances by yourself for the first time and you feel overwhelmed, get help. (The woman whose story I’ve told in the opening paragraph ended up asking her mom for help). In Canada, the Toronto Star maintains a great website with lots of practical information. For help with your specific situation, it might be worth your while to sit down with someone where you do your banking, a certified financial planner or a certified divorce financial analyst.