Context

In the context of rapidly changing financial markets and increasing individual responsibility, being able to make informed financial decisions is of increasing importance for financial well-being, particularly in relation to saving and retirement planning. However, low levels of financial literacy are widespread and particularly severe among women. This is important because women tend to live longer than men and therefore have different savings needs. This study was undertaken to deepen the understanding of the gender differences in financial literacy by reviewing existing evidence for gender gap in three countries and offering possible explanations.

The study

This study is part of the Global Financial Literacy Excellence Centre's working paper Series. It draws on previously published studies and uses a secondary analysis of existing data to explore levels of financial literacy and its impacts among women, compared with men, in three countries: Germany, Netherlands and the US. The researchers combined data from large-scale national surveys: the 2009 US National Financial Capability Study; the 2010 Dutch Nederlandsche Bank Household Panel; and the 2009 SAVE survey of German households. Each had, different sampling and data collection methods but all surveyed 1,500 to 2,200 respondents. All three surveys included three simple questions on key concepts of economics and finance, expressed in everyday terms, requiring simple interest rate calculations and an understanding of inflation and risk diversification.

Key findings

• In each country, for each of the three questions, the proportion of correct answers was significantly lower among women than men, except for the interest rate question in the Netherlands, which did not yield a significant difference.
• The proportions answering all three questions correctly were 38% of men and 22% of women in the US, 55% of men and 35% of women in the Netherlands and 60% of men and 48% of women in Germany.
• Women were more likely to say they did not know the answers. For example, 29% of men and 46% of women in Netherlands gave at least one “do not know” response.
• There was no gender difference between men and women in East Germany specifically, which led authors concluding that history and experience is key to learning.

• Even after controlling other factors, being a woman was associated with a significantly lower probability of answering all three questions correctly: by 14 percentage points in the US; 12 percentage points in the Netherlands; and 7 percentage points in Germany.

• There was a strong correlation between actual and self-assessed financial knowledge in all three countries, regardless of gender.
• Self-assessed financial literacy, measured using a Likert-type scale, was significantly lower among women than men in Germany and the Netherlands but not in the US.

• A similar proportion of men and women in the Netherlands (23% and 23%) and Germany (35% and 31%) refer to financial professionals for information (no comparable data was available for the US). However, women are more likely than men to refer to family and friends for advice.

• Women have greater difficulty making financial decisions such as borrowing and planning for retirement and this can have severe consequences for financial well-being such as pensions and poverty (based on the review of previous literature).

Points to consider

The lack of detailed information about the different survey methodologies and weighting strategies in each country make it difficult to discern the representativeness of the sample to each country’s population and the comparability of the results across countries.

It is not always clear why the sample bases fall away for particular analyses, which compounds concerns about the representativeness of the data

The importance of the gender gap in saving and retirement planning is likely to be of importance in many more economically advanced countries. However, the relevance of simple financial literacy questions to skills and behaviour – or how improved knowledge is expected to lead to better outcomes – is not clearly investigated in the study (although the link is made based on findings from the previous literature).

Full report

How financially literate are women? - full report