If asked three simple
questions designed to measure financial literacy, more than half of Americans
will answer incorrectly. But there is another disturbing finding in the data
from the U.S. National Financial
Capability Study: Women know even less than men.
This gender gap is
not limited to the United States. Women in countries as different as Germany,
Australia, Canada, Italy, Sweden, Switzerland, New Zealand, Japan and the
Netherlands all display lower levels of financial literacy than men. As
additional countries are added to the financial literacy comparison, this
evidence grows even more persistent.
This disparity is
important because women tend to live longer than men. Moreover, women have less
attachment to the labor market, with interrupted careers because of
childbearing, and potentially fewer financial resources over the life cycle.
Thus, women’s financial acumen is particularly important for their well-being
before and after retirement.
Together with our
international collaborators, we set out to study this gender difference in
a paper that covers data from the most comparable countries: the United
States, Germany and the Netherlands. Even accounting for different workforce
participation, educational levels and parenting responsibilities, the gender
gap cannot be fully explained. For example, although younger generations of
women are more likely to be in labor market, to have college degrees and to
move away from traditional societal roles, young women in all three countries
were less financially literate than young men.
One might argue that
there is specialization within a household, and women have delegated the
acquisition of financial knowledge and financial decision-making to their
partners. However, even in households where women are the financial
decision-makers, they know less than men. And women do not know less because
they opt to rely on financial advisers who supplement their lack of knowledge.
Indeed, they are lesslikely
than their male counterparts to consult advisers or online resources for
information.
In looking at the
channels through which financial literacy may be acquired, we examined data
from what was East Germany vs. that from West Germany, since residents of these
two regions were exposed to different financial markets and institutions.
Although 25 years have passed since unification, we find large differences in
financial literacy between the East and the West. This supports evidence that
learning can take a long time. But it also tells us something more: There is a
gender difference among respondents in West Germany but no knowledge gap
between men and women living in East Germany, even after accounting for many
demographic and economic characteristics. In other words, as financial
institutions and markets develop, there is no guarantee that women will acquire
financial literacy in the same way that men do.
