I remember sitting in front of my computer and looking at the papers that became part of a special issue of the Journal of Pension Economics and Finance and comparing the tables across so many countries. It was so clear, so stunning, so evident; yet I had not seen when I considered the data from one country only. It took that comparison, which was done for a completely different set of reasons, to unveil that striking gender difference in financial literacy.
The finding can be interpreted in different ways and this is what my current research is exploring. First, women may simply be aware of their lack of knowledge and they are willing to admit it. This is consistent with some of my other data that show that women tend to give themselves low rating when assessing their financial knowledge. So, women know that “they do not know.” This may, in fact, be the first step to acquire or want to acquire knowledge. Second, women may have financial knowledge but are less confident in their knowledge and are less willing to guess or choose an answer when they are not sure it is the correct one. Some may view this attitude as a drawback, but I see it as a potential advantage. It takes gut to admit one does not know or does not know enough. Humility in the world of finance may give better results than being bold, assertive, and.. well wrong. In case you did not notice, we have experienced a lot of that in the past few years. Third, women may be less comfortable with the jargon that is used in finance. We assume that people know the technical financial terms, few bother to explain them, but most people do not have a clue about what inflation, real interest rates, and risk even mean, and women are willing to say “I do not know.”
What makes this result so important is that women may be the ideal target for financial education programs. Why attend such a program when one thinks he/she knows (according to my findings, only one third of the population has a very basic knowledge of financial literacy; believe me, that program is so much needed!). Many studies have found that women are not only more likely to attend financial education programs (in the program that I myself run, the large majority of participants were women), but women are also more likely to change their behavior after attending the program.
In summary, empowering women with the financial knowledge, the confidence, the terms that are used in finance could be a powerful tool; women may willing to use it. Happy International Women’s Day.