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Smith Professors Launch New Study of Women and Money

Words of advice from the Smith Program for Women and Financial Independence (WFI): “Life is long, plan your financial future now.”

To help women with that planning, Mahnaz Mahdavi, WFI director and professor of economics, and Sue J. M. Freeman, psychologist and professor of education and child study, will be embarking on a new research study of women and money beyond the college years. The survey will seek the opinions and experiences of Smith alumnae to provide insight into women’s concerns about handling money and finances and planning for retirement. This assessment of financial knowledge, behavior and attitudes will contribute to programming that benefits Smith students and alumnae.

The need for financial literacy is paramount for women, insist Mahdavi and Freeman, especially given women’s rapidly changing economic roles in society and the family. To help Smith undergraduates become more financially savvy, the Smith Program for Women and Financial Independence (WFI) was formally launched in 2001.

According to Mahdavi, the program’s founding director, WFI is believed to be the first comprehensive program of its kind for women in this country. WFI has committed resources to improve women’s financial literacy by providing students with the knowledge to tackle life’s financial decisions and the experience to complement that knowledge.

Among WFI’s offerings are educational programs that include weekly noncredit courses taught by Smith economics department faculty as well as lectures by industry professionals covering a variety of topics including entrepreneurship, socially responsible investing, philanthropy and identity theft. Smith students also learn firsthand about investing through an entirely student-run Investment Club that was initially endowed by a Smith alumna, class of 1931. In an outreach program for the larger community, Smith students teach local high school students and underprivileged teenage girls about credit, borrowing and personal finance. Mahdavi points to student testimonials, such as the following, that underscore WFI’s relevance: “One program in particular that has shaped me into a stronger woman has been WFI.”

The Gains and the Losses

In recent decades women have gained unprecedented economic power, Freeman notes, as reflected in the plethora of articles in the popular press advising them about money. Recent census data shows that women in their 20s working full time in the nation’s largest urban areas now earn more than their male counterparts. Women also now outnumber men as college graduates and in earning professional and advanced degrees.

Although women are still rare at the top of the corporate hierarchy—accounting for less than 12 percent of Fortune 500 CEOs—they have swelled the entrepreneurial ranks. Thirty-eight percent of small business owners are women, and more than two-thirds of all new businesses are initiated by women, says Freeman, the author of Managing Lives: Corporate Women and Social Change.

In a span of 50 years, women’s roles in the family have changed along with their economic clout. As Freeman and Mahdavi point out, now a majority of mothers with children under 6 are gainfully employed full time; only 14 percent of families have a male breadwinner and a female at home full time. Furthermore, one-quarter of women in two-income households now earn more than their husbands. Women serve as the primary household managers, making 80 percent of all consumption decisions, as reflected in the amount of advertising aimed at women today.

Women are making economic gains through legacy as well, increasingly inheriting wealth from family and as widows.

“These gains notwithstanding, most of those living in poverty in this country are women and children,” write Freeman and Mahdavi in a preliminary narrative. “Women are at significant financial risk when their lives take a turn, through divorce or death of a spouse or partner, for example. Women over 65 are twice as likely as their male peers to be poor. A staggering statistic reveals that 75 percent of the American elderly poor are women.

“Among the reasons for this disparity is that women move in and out of the labor market more frequently and earn less than men over a working lifetime. The combination of women’s lower earned income and longer life spans makes their lesser contributions to retirement critical,” they note.

As more companies abolish pension plans and workers are obliged to fund and plan for their own retirements, knowing how to “self-direct” one’s investments has become crucial, Mahdavi and Freeman say; yet as investors, women tend to be more conservative and risk averse.

New Research About Women and Money

Mahdavi and Freeman hope to extend and refine information gathered from WFI’s 2005 nationwide survey of college students that focused on acquisition and use of credit cards. “The results reaffirm the need for financial education for college students,” they report. “The results of the random survey of 700 students showed that women students tend to carry larger amounts of credit card debt, pay credit card balances late and are generally less knowledgeable about finance than their male counterparts.”

Smith alumnae should watch for details, coming this fall via e-mail and snail mail, regarding the upcoming online survey.

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