Why do women not have the same financial knowledge as men? A new survey has highlighted that women’s financial knowledge falls far below men and that there is also a significant gap between ethnicities. How can this be? We don’t have different education systems for men and women nor by ethnic group, so why do women fall behind and what is the impact?
CFFC (Commission for Financial Capability) surveyed 3132 New Zealanders between January to June 2020. They used questions from an OECD toolkit to measure understanding of financial concepts such as interest, inflation, and risk diversification. Only 22% of all respondents answered all questions correctly, and only half as many women as men answered all questions correctly.
The difference between men and women widened with age, indicating that at some point women stop improving their financial knowledge while men continue to learn and improve. Suggestions for why this could be the case included that many women prioritise caring for their family over making money and that they have a disconnect between not valuing money per se and appreciating what money can do for them.
That women are better than men at managing money in the short term, has often been acknowledged. We fall short when it comes to investment and longer-term financial decision making. Is this because women are more likely to take on the responsibility of managing the household budget alongside caring for their family, but don’t have the time or inclination to prioritise thinking about longer-term financial health? When your living in the ‘now’ - paying the immediate bills, caring for kids or relatives, and working, - it’s easy to see why making time to think beyond the immediate financial situation is challenging and not a priority.
Interestingly at Pinnacle Life, we know that women are more likely to do the research on Life Insurance than men, but when it comes to taking out cover men have a higher sum insured than women. We think this is because women are thinking about caring for their family and what situation they or their partner might find themselves in if the worst were to happen. Perhaps we need to encourage women to think about caring for their families if the ‘best’ is to happen as well. If we’re going to live a long (and happy) life we need to be set up well for the future.
The results showed that while New Zealanders had a good understanding of inflation, interest, risk, and return, they struggled with understanding compound interest, risk diversification and the time value of money. Important concepts when it comes to growing your money and wealth. If we can start to get women thinking and talking about these concepts and building them into our household management budgets, maybe we would start to see an improvement in understanding.
We know women are great communicators. We know we want the best for our families. The ‘best’ must include long term financial health which, starts with understanding the different financial concepts and tools available. Let’s start by talking to each other and sharing our understanding.
If you’re interested in testing out your financial understanding you can find the survey questions here on page 3.