Men may not be more financially savvy than women after all, study says
Men may not have the financial prowess over women that we attribute them to have, according to a new study by CPA Canada.
The idea that men are more financially savvy than their female counterparts is internationally recognized with numerous studies conducted in dozens of countries coming to the same conclusion. Even the Organization for Economic Cooperation and Development (OECD) has recommended closing the gender gap on finances to improve a country’s economic development.
Typical findings include that women are more impulsive shoppers, are less likely to save money, show less confidence managing investments, are more averse to taking financial risks and, in heterosexual couples, do not take charge of long-term household financial decision-making. Overall, women are pegged as being less financially literate than men.
The study—The Impact of Personality Traits–Taking a fresh look at gender differences in financial literacy—challenges these conclusions by introducing a new set of variables, shedding more light on the role gender plays in financial literacy.
“The lens with which we view financials may be based on what [men] value and are over emphasized from a male point of view,” says study author Johanna Peetz, associate professor of psychology at Carleton University. “We need to look at a wider array of financial behaviours.”
Broadening the outlook, the study considers other factors that can play a role in one’s financial knowledge, including age, income, education level and personality traits based on the Big Five Inventory: openness, conscientiousness, extraversion, agreeableness and neuroticism.
“When we take socio-demographic and, in particular, personality traits into account, then gender starts to look a lot less important,” the study says.
Building on research conducted by the Financial Consumer Agency of Canada (FCAC) and the Statistics Canada Canadian Financial Capabilities Study, a survey and a 14-item objective knowledge quiz were used to measure financial behaviour, financial attitudes, psychological and socio-economic knowledge traits.
Turns out, when considering age, income, education and personality, women are not much different than men in financial wherewithal when it comes to making ends meet, keeping track of money and planning ahead. Using the same variables, the study also determined that personality plays a much more influential role in decision-making areas including choosing financial products and staying informed about products, as well as in the test for objective financial knowledge.
“Once we could include other factors…based on the techniques we used, we were able to explain the vast majority of the gaps on most scales,” says author Jennifer Robson, associate professor of political management at Carleton University.
“Nobody has ever done that before,” she adds.
These results, the study says, suggest that more could be done by financial markets, financial educators and financial news providers to address the needs of women by giving greater consideration to gender roles and how they relate to money management, socio-economic variance and personality differences.
“Gender is an imperfect proxy,” says Robson. “There is a lot of variation and there is a persistent gap when it comes to choosing products and staying informed. It’s an early warning signal that it is happening in the marketplace, which is not adequately responding to the needs of women.”
Peetz suggests when speaking to women about financial planning the conversation could relate specially to the typical responsibilities a woman undertakes in the household such as childcare costs, education savings and groceries.
“You could communicate financial information that is more appealing to women making financial decisions,” she says. “Linking it to the social roles more typically taken on by women could be more inclusive.”
Moving forward, Robson and Peetz believe the study is a launching point with further exploration and research needed into the gender nuances of financial literacy. Influential elements, like those above, and others not addressed in this study including religious beliefs and cultural affiliations should also be considered.
“We are challenging some sort of gospel here,” says Robson. “Looking at that interaction between gender and culture, it could be next for research and thinking.”
Read The Impact of Personality Traits–Taking a fresh look at gender differences in financial literacy for more insight into how socio-demographics and personality traits impact financial literacy.