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Gender Disparities in Financial Literacy

This chapter discusses several studies that have found a gender gap in financial literacy, with men typically outperforming women. Some key findings include: - Men score higher than women on financial literacy assessments and perceive themselves to have higher financial literacy. - Gender and academic achievement impact financial literacy levels, with men and those with higher grades having higher literacy. - Factors like education can mediate the impact of gender on risk tolerance. - The gender gap persists even when controlling for socioeconomic factors. - Most countries show women having lower financial literacy than men.

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16 views3 pages

Gender Disparities in Financial Literacy

This chapter discusses several studies that have found a gender gap in financial literacy, with men typically outperforming women. Some key findings include: - Men score higher than women on financial literacy assessments and perceive themselves to have higher financial literacy. - Gender and academic achievement impact financial literacy levels, with men and those with higher grades having higher literacy. - Factors like education can mediate the impact of gender on risk tolerance. - The gender gap persists even when controlling for socioeconomic factors. - Most countries show women having lower financial literacy than men.

Uploaded by

armanlasprilla
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

CHAPTER 2

Many studies of financial literacy, defined here as objective knowledge of topics in personal

finance, have concluded that men perform better than women ( Almenberg and Dreber, 2015;

Bocchianlini and Ronchini, 2015; Drolet, 2016; Cupák et al., 2018; Preston and Wright, 2019;

Rothwell and Wu, 2019). This gender gap may be among the most reliable findings in the research on

financial literacy.

Men not only score higher in financial literacy assessment scales, but they also show

structurally higher levels of self-perceived financial literacy (Aristei & Gallo, 2021; Bannier & Schwarz,

2018; Jha & Shayo, 2021).

Barboza, Smith, and Pesek (2016) studied the relation between gender, academic

achievement, and financial literacy level using data from 380 university students. They used a series

of Probit models in their studies and measured academic achievement with score averages. As a

result, they stated that gender and academic achievement had significant effects on financial literacy.

The financial literacy levels of men were higher than women, with individuals with higher score

averages being more advantageous than those with low score averages. The individuals with the

lowest levels of financial literacy were women with low score averages.

In Cupples et al.’s (2013) study, the impact of gender on risk tolerance diminished when

education served as a mediator, suggesting that various factors mediate gender differences in

financial risk tolerance. The findings underscore the need to explore whether the disparity in risk

tolerance is inherently linked to gender or if other moderating factors influence the connection

between gender and risk tolerance. Consequently, this research contributes to the existing literature

by dissecting the gender difference in risk tolerance through the analysis of a substantial, nationally

representative dataset.
While socioeconomic and role disparities could contribute to the observed gender gap in

financial knowledge, various studies indicate that women tend to underperform compared to men,

persisting even when adjusting for socioeconomic factors (Drolet et al, 2016).

Prior explanatory attempts of the gender gap in financial literacy have concluded that

sociodemographic characteristics such as age, education, or income have a limited effect on sex

differences (Fonseca et al., 2012; Preston & Wright, 2019).

In their 2021 research, Gustav Tinghög, Ali Ahmed, Kinga Barrafrem, Thérèse Lind, Kenny

Skagerlund, and Daniel Västfjäll critically address the imperative question of why women exhibit lower

financial literacy than men, offering essential insights for crafting policies to mitigate gender disparities

and enhance women’s financial acumen. Despite exploring factors such as confidence in financial

matters and stereotype threat, the investigation reveals a robust gender gap even in non-numerical

financial contexts, challenging previous assumptions and underscoring the necessity for targeted

interventions and a nuanced understanding of gender-specific challenges in financial literacy.

Hasler and Lusardi (2017) studied the relation between financial literacy and gender in 143

countries using data from the S&P Global FinLit Survey. In general, it was stated that the financial

literacy levels in the world were very low, emphasizing that around 3.5 billion people in the world

population had difficulty understanding basic financial concepts. The most important point under the

light of the survey data is that women had lower financial literacy levels than men in the majority of

countries.

In the study of Jawaheer & Vikneswaran (2016) in their study on gender difference in financial

decision making among working class individuals found significant relation between gender and risk

tolerance with females being more risk averse , however no significant relation was found between

gender and financial literacy and type of investment.


In the research of Jamie Wagner (2022) that delves into gender differences in household

financial behavior, utilizing data from the 2018 National Financial Capability Study, the study reveals a

notable gap. There is a significantly lower likelihood of single females engaging in key financial

behaviors compared to men. Furthermore, even within joint households, females exhibit a reduced

propensity for these financial practices compared to their male counterparts. The significance of this

investigation lies in shedding light on potential disparities in financial preparedness, emphasizing that

females, whether in single or joint households, may face challenges in effective financial decision-

making, impacting their ability to manage current personal finances and accumulate wealth for the

future. Despite these insightful findings, there is a need for further exploration into the underlying

factors contributing to these gender disparities and the potential implications for long-term financial

well-being.

In the study of Kull (2020) and others (Marsh and Bloomberg, 2020; Miljömärkning Sverige,

2018), women are likely to invest in large, renowned brands such as H&M and Louis Vuitton, while

men are over-represented investors in commodities and high-risk assets. However, in recent years,

women have increased their presence on the financial market, especially in responsible investing.

Therefore, understanding gender differences in investment and possible causes is highly important.

Common questions

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According to Wagner (2022), women in household settings, whether single or joint, tend to engage less in financial behaviors compared to men, which highlights challenges in effective financial decision-making. This is attributed to lower financial literacy and risk tolerance, potentially impacting their ability to manage finances efficiently and secure future financial stability .

The gender gap in financial literacy can lead to significant disparities in financial preparedness and decision-making capabilities, as indicated by Wagner (2022), where single females and females in joint households exhibit a reduced propensity for engaging in key financial behaviors . This disparity can impact their ability to manage personal finances effectively and accumulate wealth, potentially affecting their long-term financial well-being and stability .

Research by Jawaheer & Vikneswaran (2016) shows a significant relationship between gender and risk tolerance, with women generally being more risk-averse compared to their male counterparts . This difference in risk tolerance influences financial decision-making, particularly in the types of investments and financial strategies individuals are likely to pursue .

Research by Tinghög et al. (2021) suggests the necessity for targeted interventions that address the nuanced challenges women face in financial literacy. Such interventions should consider factors beyond educational attainment, such as confidence-building and challenging stereotype threats, to effectively reduce the gender gap and improve women's financial acumen .

Global financial literacy levels are characterized as very low, with around 3.5 billion people struggling to understand basic financial concepts . Women consistently demonstrate lower financial literacy levels compared to men across most countries, underscoring a widespread gender disparity in understanding financial principles .

Cupples et al. (2013) suggest that education acts as a mediator in the impact of gender on financial risk tolerance, indicating that gender differences might not be solely inherent but influenced by educational attainment. Additionally, socioeconomic and role disparities, as noted by the research, may contribute but show limited effects when controlled for these factors . Moreover, the study by Barboza, Smith, and Pesek (2016) indicates that academic achievement significantly affects financial literacy levels, hinting at a complex interaction between gender, education, and financial knowledge .

Academic achievement significantly influences financial literacy levels, with Barboza, Smith, and Pesek (2016) showing that higher academic scores correlate with higher financial literacy . This link suggests that academic performance can serve as a buffer against lower financial literacy levels, particularly among women who traditionally score lower in these assessments as compared to men .

While sociodemographic factors like age, education, and income are often considered in understanding gender disparities in financial literacy, Fonseca et al. (2012) and Preston & Wright (2019) suggest they have a limited effect on these differences . This could be due to the ingrained structural inequalities and cultural factors that are not easily accounted for by basic sociodemographic indicators, implying that more nuanced factors are at play beyond measurable sociodemographic characteristics .

Gender affects investment preferences, with women historically investing in large, well-known brands like H&M and Louis Vuitton, while men prefer commodities and high-risk assets . However, recent years have seen an increase in women's presence in the financial market, particularly in responsible investing, indicating a shift towards more diverse investment strategies .

Research by Tinghög et al. (2021) discovered that despite accounting for confidence in financial matters and stereotype threat, a significant gender gap persists even in non-numerical aspects of financial literacy . This suggests that these factors may contribute to the gender gap, yet do not entirely explain it, challenging assumptions that confidence and social expectations are the sole drivers of disparities in financial literacy .

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