The Intersection of Race, Gender, and Financial Capability: Implications for Financial Health In Later Life

Background and Purpose: Financial capability, encompassing financial literacy, access, and behavior, can influence individuals’ ability to manage finances and is a precursor to robust financial health and well-being in later life. However, individuals with distinct social identities, such as gender and race, may have varied experiences of financial socialization, resulting in heterogeneous financial capability and health later in life. Guided by the life course perspective and the financial capability framework, we examine the intersectional, gendered, and racial pathways linking financial capability and financial health using population-based data from the United States.

Methods: We used data from 11,610 respondents aged 50 and over in the 2018 National Financial Capability Study. Latent path analysis via structural equation modeling (SEM) was employed to examine how financial literacy (e.g., self-reported financial knowledge, objective and subjective financial literacy) and financial access (e.g., checking account, saving account, investment account, retirement account, and credit account) were associated with financial behavior (e.g., set aside rainy-day fund and save for retirement), and whether these components predicted adverse financial health (e.g., carrying too much debt, difficulties making ends meet, and use of alternative financial services). The multigroup SEM was further employed to investigate how the gender-race intersections moderated the relationships between financial capability and adverse financial health (white men [n=5,007], white women [n=5,783], black men [n=314], and black women [n=506]). To handle categorical indicators, we used a weighted least squares with means and variances (WLSMV) adjusted estimator.

Results: The overall model results (χ²₍₄₉₎=1325.603, p≤.001; CFI=0.967; TLI=0.956; SRMR=0.050; RMSEA=0.047 [0.045, 0.050]) showed that financial literacy (FL; b=0.889, β=0.552; all p≤.001) and financial access (FA; b=0.534, β=0.437; all p≤.001) were positively associated with financial behavior, but financial behavior (FB; b=−1.230, β=−0.885; all p≤.001) was negatively associated with adverse financial health. The multigroup analyses were conducted by constraining all path coefficients to be equal across the four groups, compared with the baseline model that assumed path coefficients were freely estimated. The significant chi-square differences (∆χ²_(df)=31.817₍₉₎, p≤.001) suggest that these associations varied by gender-race intersections. Overall, the effects of financial literacy were pronounced in men, whereas financial access and financial behavior were evident in whites. A gradient protective effect of financial capability on adverse financial health was identified in the race-gender intersectionality, suggesting that black women were the most vulnerable group in terms of financial health.

Conclusions and Implications: As financial capability is a precursor to robust economic well-being in later life, the gender and race/ethnicity heterogeneity in financial capability should be addressed through a more structured life-course program and policy to promote gender and race equity in economic well-being in later life. Strategies to promote financial health (e.g., financial coaching, credit counseling, and financial profile assessments) in later life should target Black people, particularly Black women. Policies and programs that expand financial inclusion should be developed to reach and serve the financially underserved black and older women.