Is there a gender gap in financial literacy?
Photo by Rene Asmussen
Financial literacy is defined as having the skills, knowledge and capacity to make informed financial decisions. Interestingly, there is a persistent gender gap in financial literacy. Research shows that while the gap is narrowing, women in the U.S. and Canada continue to have lower financial literacy scores than men.
The gender gap is puzzling, especially when more women than men attend university. Undergraduate enrolment numbers in the U.S. and Canada add up to around 18 million, of which 7.6 million (42%) are men and 10.5 million (58%) are women.
Differences in financial literacy are crucial, especially considering longevity. Given that North American women live about six years longer than men, ensuring adequate financial literacy is vital. It greatly enhances financial outcomes, including savings, investments, wealth accumulation and retirement planning.
But what is behind the gender gap in financial literacy? With an increasing number of studies into the issue, there are a few theories.
Stereotypes Believing stereotypes about women and money affects their confidence in handling finances. Studies show stereotypes can make women doubt their abilities and feel more anxious compared to men, even if they make good financial choices. Studies also find that stereotypes undermine women’s performance on financial tests.
Socio-economics Higher education and income are linked to better financial literacy, but lower-income individuals also possess financial knowledge. Income positively correlates with financial literacy across genders. Financial services often target higher-income households, posing challenges for women, particularly, as studies show, for marginalized groups engaged in low-income employment.
Financial decisioning The responsibility and decision making of household finances is still very gendered. Women are more likely to be responsible for daily financial spending and allocation, yet less likely to engage in the decision making of large financial decisions in the household. A study by Statistics Canada found that in households where a male partner is mainly responsible for financial management, he performed better on financial literacy tests.
While some of the causes of the gender gap may be contested, gender inequalities persist, contributing to disparities in financial literacy. Thus, financial literacy programs play a crucial role in addressing this issue. These programs should aim to neutralize gender disparities and bridge the financial literacy gap effectively.
Tim McAlpine is the Founder & CEO of Currency Marketing. He is best known for developing the It's a Money Thing Financial Education Program that credit unions from around North America are using to connect with new young adult members. He is also a driving force behind CUES Emerge, an emerging leader program that combines online learning, peer collaboration and an exciting competition component.
