4 Reasons Why Financial Literacy Is Key For Women Entrepreneurs?
Feb 01, 2021
Women are one of the most critical business drivers in today's global economy. They represent half of all international business graduates, comprise a large part of the work-force, and formulate 1/3rd of the total percentage of entrepreneurs worldwide.
Today, we are proud to see women who have committed to diversified roles in all professions worldwide. Their ability to be efficient managers has pushed them to explore new paths and reach new heights.
At the same time, however, women are not as financially literate as their male counterparts. They are often under the impression that financial matters are better-taken care of by men or that they have to rely on a family member for financial management support.
Independent research conducted to look at women's financial literacy projected that women were more likely to fail at a financial literacy quiz than their male peers. The data suggests the low ability of women to decipher the terms involving in-depth financial concepts.
More women are now entering the market as independent businesswomen than ever before. They are venturing into unknown areas, launching their start-ups, and investing money into the national economy. Their inability to understand finance at its very core can stifle their growth and keep them lagging behind men as always.
Here are four reasons why you need to work on your financial knowledge as a woman entrepreneur:
1. Gender disparity can be minimized with financial literacy.
Several studies indicate that women struggle with financial literacy. According to the US department of education, 3.8 million adult women in the United States alone do not even have a general understanding of economic terminology. The lack of essential competencies of women in terms of finances compared to men makes them more unlikely to save, have a retirement plan, and incur the costs of emergency funds. The gender disparity that begins here will only result in them suffering as businesswomen and successful entrepreneurs.
The wage gap that is so evident in the job market has to do a lot with women unable to experiment with their professions and job choices. Women tend to focus on trying to land high-paying jobs compared to jobs with exceptional chances of scaling up in the future. The gender disparity that begins at job markets keeps on amplifying over time for women and can diminish their chances of being successful entrepreneurs.
2. Financial education leads to better debt control.
Women with lower knowledge of debt and payment cycles are more likely to become confused with all the daunting paperwork. They are likely to make poor financial decisions for themselves and their businesses. The opportunities can quickly become threats when there is a sense of insecurity attached, coupled with a lack of basic knowledge.
Purnima Madaan, a leading digital entrepreneur, talks about this in one of her reflective pieces. She comments that 30% of women are financially literate as compared to 35% of men. This can lead them to be easily exploited, especially in mortgage finances, fraudulent schemes, and debt traps.
Research shows that women live longer than men. And, senior women can end up in poverty more conveniently than men because of the poor choices. Debt control amongst women entrepreneurs can be conveniently improved by educating them to help them make more informed decisions.
3. Financial literacy broadens opportunities for bold investments.
Women entrepreneurship has led to wealth accumulation, community building, and a quicker pace of development for females over the years. Adequate knowledge of savings, investments, and returns can also have a direct positive impact on building stable financial instruments for women in particular.
Women with poor knowledge of finances tend to feel less confident in running and leading expenses. Independent research conducted with women respondents pointed out that women with no exposure to financial education looked at their savings as money for a house or amount for making an expense on their children's education. The lack of most women to foresee an investment in the saved up money is a threat to many potential women entrepreneurs who might have great ideas for businesses that could easily thrive.
The poor decision making can lead to women missing out on opportunities, and bad decisions could bring forth economic downfalls.
4. Financial knowledge can improve profit-making.
Sound financial decisions can be achieved when the right kind of knowledge is coupled with skill, attitude, and awareness. The lack of any one of these essential attributes during a decision-making process can limit the ability to foresee the future. All entrepreneurs, men or women, must predict upcoming market trends, easily judge the demand, supply chain, and evaluate their practices and strategies based on numbers, figures, and formulas.
Empirical evidence suggests that financially sound understanding can positively impact behavior and help individuals participate in financial markets much more confidently. The research further predicts that women are more likely to undermine gains, and their confidence is impeded largely when they have a low financial education. The women might be the largest contributors to economic activities in the production sector but are usually hesitant to lead investment ways.
Keep learning, ladies!
Women need to have sound knowledge beyond just basics to reach the position where their profit margins can go full-potential.
Women and their financial understanding bring forth a lot of benefits for them as individuals, but it can improve family lifestyle as well. The intergenerational ability to become able-minded investors is also enhanced when women are educated. Women can take control of the existing power dynamic and work much more actively for the mental and physical well being of their families and themselves. Research shows that women are much more likely to keep their families happier and healthier when finances are under their control.
Women who become sole breadwinners as single mothers or choose to take their financial decisions independently can find themselves in a much comfortable and confident position if they are better informed.
When you start looking at your financial status as an opportunity rather than a threat, you and your businesses can have an advantage. The self-confidence that is gathered through the accumulation of knowledge can help women entrepreneurs take chances more often. You can also get in touch with professional financial advisors and coaches who can guide you along the way.
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