Women + Financial Literacy = Bad News

Annamaria Lusardi has been researching financial literacy for years. She has co-authored a new working paper (abstract; PDF) with Tabea Bucher-Koenen, Rob Alessie, and Maarten van Rooij called “How Financially Literate Are Women?” The answer: not very. This has obvious implications not only for something like retirement savings but also the gender pay gap (which is nowhere near as large as you think).

We document strikingly similar gender differences in financial literacy across countries.  When asked to answer questions that measure knowledge of basic financial concepts, women are less likely than men to answer correctly and more likely to indicate that they do not know the answer.  In addition, women give themselves lower scores on financial literacy self-assessments than men.  Both young and old women show low levels of financial literacy.  Moreover, women for whom financial knowledge is likely to be very important–for example widows or single women–know little about concepts relevant for day-to-day financial decisions.  Even women in favorable economic conditions are less financially knowledgeable than men.  This is important because financial literacy has been linked to economic behavior, including retirement planning and wealth accumulation. Women live longer than men and are likely to spend time in widowhood. As a result, improving women’s financial literacy is key to helping them prepare for retirement and promoting their financial security.


Aldous

There is only one acceptable answer for why this is: Sexism. It's because of sexist cultural conditioning since childbirth and that's why there's a difference. If you argue it's *anything* else YOU are sexist. End of discussion.

AdoIf

If only there was a way for them to research these topics.

Derrick

I didn't realize my gender prevented females from buying a five dollar Finance 101 book on Amazon.

Wendy

I don't understand how adding financial literacy for women is bad news. That doesn't seem to be what the article is about and yet your title "financial literacy + women = bad news" implies that women should be kept in the dark.

If you did want to improve women's financial literacy, teaching it in high school would be a big step forward, perhaps instead of calculus?

TomG

I'm an engineer and feel strongly that the vast majority would be better off with knowledge of finance than Calculus. How many will become engineers versus the number who will manage a checkbook, or more importantly, a credit card.

Dan

How many women who take calculus in high school are financially challenged as adults? I'm not sure but my guess is they're not the ones who have the most trouble with personal finance.

caryatis

I bet part of this is that women are encouraged to anticipate getting married and being at least somewhat dependent on their husbands. If you don't expect to be self-sufficient after the age of 25-30, your incentive to learn about money is decreased.

Con

It is also important to note that women tend to rank themselves lower in self-assessments relative to men of similar level of knowledge.

William Morris Hamilton

Is it possible that the idea of this blog might be better expressed by the headline "Women + Financial Illiteracy = Bad News"? The current headline ("Literacy") sounds very strange, indeed. I see no reason for my comment to be posted, although I would not be sorry to see it responded to by alteration of the headline. Thank you.

Floretta

And yet women turn out to be better investors than men AND handle most of the family bill paying. Hmmmm.....

Indigo S.

I've read this, too. I wonder if women on average are less familiar with some financial concepts (not sure what this refers to -- the ability to read a balance sheet? knowing the difference between debt and equity investments? knowing how to calculate compound interest?) but are also on average more likely to be conservative with their money -- fewer impulse purchases, paying off bills on time, saving more from each paycheque albeit in low-return savings accounts. It may be that the behaviour matters more than the literacy when it comes to real-life results.

Similarly, I've read that theology students and ethics (philosophy) majors are no more likely than the average student population to help a stranger who appears to have fallen on the sidewalk.

Ruby Hocker

I feel that a lot of comments are implying that women are somehow stupid or not resourceful for learning more when the trend that the paper has found is that women in many countries are having the same issue of achieving financial literacy equal to their male counterparts. This, I think, would make it a cultural issue, not a failing of the millions of individual women.

Example: In the United States, which you would expect to be a leader on this issue, the Equal Credit Opportunity Act was passed only 41 years ago. Well into the 20th century women were barred from many financial activities and faced discrimination. There are a lot of cultural pieces to this that shouldn't be mocked and need to be addressed. Having a mother who was encouraged by her parents to be financially independent and mentored as a teen or young adult about how to manage her finances is not as common as having a father that did, which can impact the way a women coming of age in 2015 learns about personal finance.

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Tanya

Rather than turning this into an issue of gender, maybe we should be focusing on how to get everyone - male or female, old and young - to a position where they understand financial concepts that could impact them. I think we should be teaching things like managing a bank balance, getting out loans, finding the best financial products, how to avoid debt, etc, AT SCHOOL. Schools are hopelessly behind the times when it comes to producing our future citizens. I was taught things like Latin and Pythagoras theory but didn't know what APR means until I was well into my 30s... I just didn't realise how important it all was. There is a whole world of finance out there and unless you know about it, you wouldn't necessarily know to look! Education, education, education (and let's forget about whether or not people have boobs)