A gender gap in financial literacy

Benthe writes*

Even though women have outnumbered men in Dutch universities since 2006, and girls on average score higher than boys on the national high school entrance exam, the female financial literacy (FL) rate is lower than the male FL rate across all age groups in The Netherlands.

The OECD considers a person ‘financially literate’ if they possess knowledge about the most important financial concepts and risks, and have the skills to apply this knowledge to make effective decisions in various financial contexts. FL is generally measured through three questions on interest rates, inflation, and risk diversification. Bucher-Koenen et al., (2017) found that while 55.1% of Dutch men answered all three questions correctly and would be considered financially literate, only 35% of women passed the financial literacy test. Women also performed worse on all three individual questions:

This discrepancy in male and female FL scores has some unfavorable consequences. For example, women’s lower level of financial knowledge means women are less likely to invest responsibly in the stock market, own company shares, and accumulate financial wealth. As such, women also benefit less from capital growth, leading to increased gender inequalities in wealth accumulation over time.

Additionally, being financially illiterate decreases someone’s likelihood of planning for retirement and having savings. Consequently, the FL gender gap, combined with other factors like longer life-expectancies and lower earnings, explain why women have a higher risk of (old age) poverty.

Who or what is to blame? Tinghög et al. (2021) argue that social stereotypes of women being worse at handling money contribute to the FL gender gap. This happens because of a psychological phenomenon called stereotype threat: when women are primed with the idea that their gender is worse at handling money, this will cause them to also make worse financial decisions. Among 13- to 15-year-old girls, financial literacy deteriorated as stereotype strength increased. At the same time, financial literacy for boys increased with the strength of the stereotypes they had.

These stereotypes are perpetuated in the media and at the dinner table. In a Sterling Bank summary of 300 magazine articles, 65% of financial articles targeted at women defined girls as “excessive spenders” who should splurge less or depend on financial support. Among articles aimed at men, 70% stressed the importance of monetary success and financial literacy and 60% gave investing advice. At home, parents are more likely to discuss investing with their sons than with their daughters because they often view their sons as “future financial providers.”

Bottom Line: Dutch women are less financially literate than men, which contributes to the gender difference in wealth accumulation and puts women at a higher risk of poverty. Research suggests that the image of women as big spenders who are bad at handling money contributes to this gender gap in financial literacy.

* Please help my Economic Growth & Development students by commenting on unclear analysis, alternative perspectives, better data sources, or maybe just saying something nice :).

Author: David Zetland

I'm a political-economist from California who now lives in Amsterdam.

2 thoughts on “A gender gap in financial literacy”

  1. Hi Benthe! This is such an interesting article. From my perspective as an outsider to the Netherlands, I have always been told it is one of the best countries for gender equality. It is quite surprising to find that there is a gender gap in financial literacy. Even more surprising is that this gap is related to the persistence of gender stereotypes. As a woman, I rarely stop to think about how financial stereotypes affect my view on financial knowledge. It is definitely something I will be more aware of in the future. Your article sheds light on the fact that, even in the most gender-egalitarian countries, there are quite a few steps to be taken in relation to gender equality and, in particular, the financial independence of women.

    However, I would like to ask if you have considered other variables that can be related to the gender gap in financial literacy other than the stereotype threat? The gap between men and women in financial literacy is quite significant and it makes me wonder whether there might be other relevant variables which could induce such a gap.

    1. Thank you Alexia! I think there are for sure more variables that relate to financial literacy. For example, women in The Netherlands earn less and accumulate less money over a lifetime than men. One reason for this is that women work significantly less than men (28.5 hours compared to 39 hours a week). I can see how someone who has less money to “take care of” also sees less urgency in learning how to deal with money. This can be problematic as I think knowing how to deal with money is just as important when you are not the main provider in a household. Divorces happen quite often.

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