Financial literacy is important for all people, but especially for women because of their longer life spans, weaker earning power and bigger gaps in employment as they quit to take care of young kids or aging parents. “We’re paid less. We go in and out of the workforce. We live longer. We have fewer dollars, but more years [of retirement] to pay for,” says Carrie Schwab-Pomerantz, board chair and president of the Charles Schwab Foundation.
Technology could help alleviate some of these problems, allowing women to work remotely and thus have flexible work schedules, adds Shannon Schuyler, chief purpose officer and U.S. corporate responsibility leader at PwC, as well as president of the PwC Charitable Foundation. Men also play an important role by giving women a leg up the corporate ladder and sharing more responsibilities at home.
Knowledge at Wharton spoke to the two leaders about the importance of financial literacy for women in an interview on the Knowledge at Wharton radio show, which airs on Wharton Business Radio on SiriusXM channel 111.
Below is an edited transcript of their discussion.
Knowledge at Wharton: What do we need to do to improve financial literacy here in the U.S.?
Carrie Schwab-Pomerantz: We need to make it [a part of the] culture, where we take it as a responsibility to understand and learn about financial literacy. … The climate is changing where today we don’t have [as many traditional] pensions, and retirement doesn’t provide a lot for us — so we need to learn [to be financially literate]. You start [the financial education] from the schools. You start from the nonprofits, universities, the workplace — and families also need to talk about it. It really needs to come from all institutions in our society.
Knowledge at Wharton: A recent article by Sally Blount, the dean of Northwestern University’s [Kellogg School of Management], noted that past data predicts that at least 50% of the women graduating from top MBA programs this year will leave full-time roles in the U.S. workforce within 10 years of graduating. This is either because they chose to step out or they are forced out. Do you agree with this view? If so, why do you think this is happening?
Schwab-Pomerantz: I look around at Schwab and all my colleagues and I have to admit we have great tenure here. The women that work for me have been here 15, 20 years. They’re in their mid-40s and right in the middle of raising their children. But having said that, studies do show that more women drop out [of the workforce than men].
I was talking to a friend who was at Harvard Business School, [where she got] her MBA, and she was also a member of YPO (Young Presidents’ Organization). She was lamenting that a lot of her colleagues are dropping out. I definitely think that’s the case, and for a lot of obvious reasons. There’s not the flextime [women need]. Women want to work, and [also] have a higher purpose. I think they also decided, “Hey, I’m just going to work for myself and call my own shots.” But I do think this is not just ‘a woman thing.’ I think millennials in general are also moving in this direction. So companies are going to have to respond.
Shannon Schuyler: By 2020, about 40% of the workforce will be freelancers. It used to be that people wanted to come to an organization and stay, and again, [this was true] across gender groups, and across other demographics. Now people want to leave. They want to define themselves. To Carrie’s point, they want to have their own purpose. They want to find [their calling] and be able to put out their own shingle.
We’re seeing that happen more and more and one of the things that is encouraging is that women tend to like to take that leap. Because they see so many things happening not only in their careers but in their personal lives, they see it as potentially having more flexibility, but also having the courage to say, “But I want to do something different,” and get together with other women to create different organizations and new companies.
“We’re paid less. We go in and out of the workforce. We live longer. We have fewer dollars but more years [of retirement] to pay for.”–Carrie Schwab-Pomerantz
I think women [in the workforce] are moving. I don’t know if they’re being forced out or [they see themselves in a situation where they are] not just taking care of the children, but also taking care of their parents, and seeing what they really needed to do in order to have all of that work for them.
Knowledge at Wharton: In the same article, Blount identifies three big challenges that women face that you just happened to mention. The first is that at the early stage of their careers when women are in their 20s or mid-30s, they earn just about 80% of what men do. When they enter their mid-career phase, say from the mid-30s to 40s, they usually bear a larger share of household responsibilities, caring both for their children and parents, in addition to managing their careers. Finally, when they make it to senior levels of management in their 40s and 50s, breaking into the C-suite can be such a huge challenge. A number of people have said that they spend years in so-called C-suite limbo.
At each of these stages, research shows that women tend to drop out of corporate life. What do you think companies should do to support a strong pipeline of women leaders at each of these stages? Could you tell us about what you are doing at your company to create such a pipeline? Also, how in your own careers did you manage these pivotal points?
Schwab-Pomerantz: Mercer (an HR consulting firm) also had a study that showed that women drop out of mid-level management. Like you said, there are different obstacles for women throughout their careers. For us, mentoring programs for middle management are really important, leadership opportunities and programs are important, which we do have.
We talked about flexibility, and the ability to telecommute and work from home goes a long way — at least one day a week. [It is also about] building that community, whether it’s around doing nonprofit work together, encouraging board positions, learning other aspects about their lives, and also potentially working part-time. I think all of those [are about] flexibility.
Now in terms of my own life, I fortunately also married a journalist. We pretty much punted back and forth, helping each other when we did. But it was hard. My kids are a little bit older. But fortunately today there are a lot more resources available to parents, whether it’s meals being delivered through Blue Apron or DoorDash or even online shopping — they go a long way. There are a lot of programs we can do to help women along the way.
Schuyler: Look at what companies have done — whether it’s been forced mandates like in the U.K. or in other [cases] where people have to disclose what their wage gap is between genders. That’s calling companies to task. Either it’s going to come out and they have to correct it or they can correct it before it comes out. … Companies are making the move and seeing the gaps they have and are working to close those. It’s taking a long time to do that, but we’re at a time now that it’s happening and they’ll be forced to [do it] if it doesn’t happen regularly.
Men are now a part of the dialogue. For so long, people wanted to create programs [to help women.] We’re realizing that it’s not necessarily a single program that [is needed]. We have to have men — people who control these organizations and [make up] the majority of people in the C-suite — make sure that women are at the table. It’s not [just about creating a program but] changing the roles of women and elevating them within the organization.
And frankly, they’re also talking about [taking] time with their family; they’re taking paternity leave if it’s offered within the organization. They’re showing that what they do in the roles that they have are equivalent to what women are doing and they’re showing that they can leverage some of that work and some of that burden that was typically just for the women. So I think having the men be more a part of this [effort at closing the inequality gap] … as well as to make sure and be the ladder to get women up, are incredibly vital.
Knowledge at Wharton: The paternity/maternity issue is one where the U.S. is behind some other countries. But also the ability to work from home, even one day a week, is something that some companies have fully embraced, while other companies had embraced it and pulled it back because they didn’t think it worked for their culture.
“Women have not been involved with their finances. We’ve abdicated. [But] I do believe that is changing a lot with the rise of the 401(k).”–Carrie Schwab-Pomerantz
Schwab-Pomerantz: Young people are doing everything digitally. We’ve got to find ways to balance being face-to-face versus online. It’s going to take some time and some practice.
Schuyler: We can learn from the millennial generation and Gen Z because they’re able to build these very important relationships without having to be in front of the person. We came from a time when we had to get on a plane [to make out-of-town meetings or] had to be in the office until seven and you had to miss things or you just couldn’t go [because you had to work]. Now, people are realizing that there’s got to be some kind of a bridge between that and you can build meaningful relationships and you can work from home and still build the same kind of contacts and collegial environments whether you were sitting [in an office] or not.
Technology can be used for that and we just have to get more comfortable with what that looks like and embrace that. The millennial generation and Gen Z are saying, “We’re not going to give on those experiences. You guys gave on those experiences and we’re not. We feel there is a way to [cultivate office relationships while balancing family needs and finding meaning in work] by leveraging technology in a good way.” The rest of us have to figure out what that looks like within our cultures.
Knowledge at Wharton: Shannon, let us go back to the point you raised about involving men as part of the conversation. One thing that is regrettable is that so few men seem to recognize this problem. [Wharton professor] Adam Grant recently wrote about a study by Leanin.org and McKinsey, which showed that 88% of men think that women have at least as many opportunities to advance as men do. What was even more striking about the study was that … just 12% of the men think that women have fewer opportunities than men do to advance in their careers. Why don’t men see these problems? What can companies do about it?
Schuyler: In fairness, the opportunities appear to be there. I think the issue is about the decisions that are made to put women in different roles. Also the decisions [made] by the woman [on whether] it is the right thing for their career at the time. So when you say, “Look, all these roles are available,” it seems as if there’s an equal playing field.
But they’re not necessarily equitable. Do they have the same mentors? Do they have the same advocates that men do? I think that’s where men don’t necessarily realize that women don’t [have those advantages]. Women don’t have those people behind them … pushing them forward. Men tend to have that because they created those relationships, whether [they sprang up from] playing golf or just because, “Hey, I’m a man, you’re a man and we watch football together.” Women don’t create circles in that same way — and typically, men aren’t a part of them.
For men, it looks like there are opportunities [for women in upper management]. I don’t fault them for believing that the opportunities are there. The issue is, how then does a woman actually get one of those roles? That’s where the rules and the game are a bit different.
Schwab-Pomerantz: I totally agree with Shannon. Personally, I was really surprised by the numbers, because the numbers do show where women are in leadership positions. But it gets back to that unconscious bias or you don’t feel discrimination if it doesn’t directly affect you.
Fortunately, today, I think men are much more modern. We do share in responsibilities. We do see each other as equals. I think that’s changing in the workplace [as well]. But I do think [any bias that remains] is unconscious. We make assumptions that women may not want [a certain] position. It’s just a matter of making a better effort to create those opportunities.
Knowledge at Wharton: Effort is one thing, and some of that is happening, but there is still a long way to go. Go back to the issue of pay between men and women. Recently the U.S. women’s hockey team talked about equal pay, while the U.S. women’s soccer team had a fight a year or so ago over equal pay. These issues are playing out not only in the boardroom but in many other places as well.
Schwab-Pomerantz: That’s the point. The numbers show that women are not in leadership positions, at the board level, in middle management, and in senior management. They are not being paid [equally as men]. As to why men feel that women have more opportunities, it’s astounding, but it’s like any type of bias or discrimination. If you’re not a party to it, and if you’re not a victim of it, you don’t feel it and you don’t see it.
Schuyler: I have a significant concern that for so long, people have said that financial literacy, or financial capability, is not a life skill. Carrie, who is doing so much great work within the financial literacy space, knows this as well. [The belief is that] somehow, and in some way, you’re going to get [financially literate] but it’s really not that important — you don’t have to teach it in schools. It’s just not a life skill.
What we’re realizing is, especially with women, that they’re falling behind in understanding and having knowledge about their finances. [Lack of financial literacy] might be one of the things that leads them not to question their pay level.
You have women who are saving at far lower rates than men are saving — 60% of women cannot come up with emergency savings for something unexpected, versus 50% of men. Only 36% of women would be able to meet their basic expenses if they were out of work for any extended period of time, versus 45% of men.
“For men, it looks like there are opportunities [for women in upper management]. … The issue is, how then does a woman actually get one of those roles?”–Shannon Schuyler
Women have grown up not having a full appreciation of financial issues. As more light is [shed] on this issue, you’re seeing an epiphany in women who say, “Hold on a second, if I’m going to be doing this — and if I’m suddenly the breadwinner or equal in the household or the only one in the house — I need to make sure that not only am I being treated the right way and compensated appropriately for my job, but I have a full understanding of the financial implications of the actions that I take.” That has been happening more recently, versus the [pattern over the] past 10, 20 or 30 years.
Knowledge at Wharton: Thanks very much for linking the issue of women and leadership to financial literacy. What you just said reminds me of some recent research by Wharton professor Olivia Mitchell, who has written a really interesting paper with George Washington University’s Annamaria Lusardi. They showed that financial literacy has a crucial role to play in these matters.
For example, one of the things that their paper found is that as women age, many of them become more financially fragile and start to carry very high levels of debt, and especially today when interest rates are starting to rise, this makes them even more financially vulnerable. How do you see the role of financial literacy in making women less vulnerable?
Schwab-Pomerantz: Well, my work has been dedicated to financial literacy for all people. But I have been very passionate, like Shannon, around women and their financial security, and their financial independence. To me, financial literacy is foundational. Shannon, you sort of alluded to it; it’s foundational in terms of our confidence, our security and independence. It allows us to do the things that we want to do.
Older women face some serious issues. That’s been the case for years. [When] you look at poverty levels, it’s mostly women [who are at] the highest levels of poverty. And again, it goes back to [the fact that] we’re paid less. We go in and out of the workforce. We live longer. We have fewer dollars but more years [of retirement] to pay. … It’s crucial for all of us to learn the basics of money management.
Unfortunately, it has to start at a young age. It has to start even as teenagers if we can do it. But at the very least, as we get into the workforce, we need every 22-year-old or 20-year-old to save 10% of their income for the rest of their life, and then they will have a relatively comfortable retirement.
Going back socially and historically, women have not been involved with their finances. We’ve abdicated. [But] I do believe that is changing a lot with the rise of the 401(k), and that is forcing us to get involved with our finances and investing. That’s a good thing. … It’s changing, but we have a long way to go.
Schuyler: It’s [a challenge] across both genders. When you look at millennials, only 24% of them demonstrate basic financial knowledge when they’re tested. And because of the [sizable] student loans they have that other generations didn’t [carry], they’re terribly concerned about how they’re going to pay off those debts as well as just be able to live [their lives].
“When you look at millennials, only 24% of them demonstrate basic financial knowledge when they’re tested.”–Shannon Schuyler
And because of that, they’re [adopting] riskier behavior — they’re starting to take money out of their 401(k) [plans], looking at using pawn shops and other things. This is an entire generation of both men and women getting caught up in [dire financial straits]. We need to figure out how can we be a part of the solution.
What Carrie has done through the Schwab Foundation and what we’re doing at PwC is to say, [financial literacy] “matters. This is a life skill. It’s a life skill [that can teach] people the difference between wants and needs and have them [forgo short-term desires and instead] look at lifelong satisfaction and [to care about] how their financial futures look.” It’s incredibly important.
It’s even more important now, considering that younger generations are much worse off because of student loans and [other factors] not letting them get more financial stability.
Knowledge at Wharton: Since you mentioned the work that both you and Carrie are doing at your respective organizations, could you tell us about some specific programs that you have to promote financial literacy? And more importantly, what would you like to do that you aren’t doing today that perhaps people listening to the program could help you do?
Schwab-Pomerantz: Obviously, being a brokerage firm, we’re in a great spot. We are providing financial services. We can do the same for our employees. And so we do do that. We have lots of educational programs around our 401(k) plans and beyond, whether it’s savings and budgeting, or buying a home, but also how to save and invest in our 401(k).
We encourage our employees to come in and work with a financial consultant, go through some financial planning. By the way, according to Annamaria Lusardi, those people who plan — put a pencil to paper and determine how much money they have, how much money they need to have, and actually try to create that plan — save on average 300% more than people who do not. So planning is really important.
What every company should do is create a workplace financial education program beyond the 401(k), because to be an investor you have to be a saver. Unfortunately, we see a lot of people who can’t make ends meet. They’re working folks, but they can’t make ends meet. So [their ability to save] to the 401(k) is far off. [Another solution] is creating a culture within your company around the importance of saving and saving for your retirement.
[Companies have to be more proactive] about it, and also look at the metrics and results. How are your employees doing with their saving and 401(k) [contributions]? Look at it from the different demographics as well. McDonald’s found that [their] African-American managers were saving a lot less than their white counterparts, even though they were earning the same amount. So they created specific programs to reach that population.