Are Young Women More Financially Independent?

Despite challenges with higher student loan debt and income inequality young women are launching into financial independence quicker than their male counterparts. This is all according to a new report released by Merrill, a Bank of America company. In the report titled “Early Adulthood: The pursuit of Financial Independence,” it was discovered  women were progressing faster than their male counterparts in terms of education, employment, and financial independence. More than 2,700 Americans between the ages of 18-34 were surveyed. The study ranked the following factors as being an independent adult: 1) being financially independent of parents; 2) having a full-time job; 3) living separately from parents; 4) buying a home; and 5) completing an education round.

It’s no wonder finances are at the top of the list. The study found finances the number one factor for stress and barrier to achieving their goals. Young adults also feel pressure from a myriad of sources such as social media, peers, and even parents when it comes to improving their lives and accomplishing goals. 82 percent said that they feel pressure to make a lot of money. 77 percent said they feel pressure to find a better job, compared to 51 percent who feel pressured to have children.

More women are going to college and earning undergraduate and graduate degrees than men. 42 percent of women hold degrees versus 31 percent of men. While this is an important distinction, this accomplishment leaves women saddled with student loans. In fact, women carry almost two-thirds of the cumulative student debt. Education, however, translates to better job opportunities and future earnings. According to the study, the labor force participation rate of young adult women continues to increase while that of men has declined.

Credit card debt is another issue for both young men and women. The average balance is $3,700 and more than half surveyed say they are struggling to pay it off. The study found one in four young adults with a 401(k) made an early withdrawal and the reason was to cover credit card debt.

So how is it that younger women seem to lead this race over their male counterparts? “Part of it is their desire to be financially independent earlier,” says Lisa Margeson, Head of Retirement Client Experience at Bank of America. “Three out of four women cite saving for the future and paying down debt as their main priorities,” Margeson added. 70 percent of women believe more strongly than men (57 percent) that parents continued support as they age is a bad idea. In fact, looking at the statistics among younger adults between the ages of 18-24, men and women are equally likely to receive support from family. Contrast that with young adults 30 and over, 62 percent of men still receive financial support compared to only 49 percent of women.

While young women are making strides towards financial independence one area that could use improvement is investing.  “Investing is an interesting area woman need to look into”, Margeson says. 27 percent of young women compared to 46 percent of men hold investments outside of their employer-sponsored retirement plans. They are also half as likely to work with a financial advisor (17 percent of women do compare to 33 percent of men). One of the main factors for the lack of women investing is that most feel like they don’t know enough about what they are doing.

As young women continue to surpass their male counterparts to financial independence, Margeson offers some tips for their journey. “Come up with a budget, stick within it, get guidance from financial advisors, break the taboo about money talk and just start somewhere. You will build confidence that will serve you better in the long run.” Creating a plan and sticking to it will aid more women as they seek financial independence.