“Many times I have thought of not living up to expectations and not having the right capabilities,” a classic quote said by us women. How do we distinguish between humility and insecurity when we are faced with financial choices? Is there a gender difference in financial knowledge?
These questions are ones we ask ourselves and can be answered by strong female figures that are represented by the IE Women in Business Club. With the aim to support, empower and connect a community of next-generation leaders in their personal and professional development, IE Women in Business Club provides access to an exceptional network of female peers, empowering you to acquire the mindset and leadership skills to step up to the most-senior roles.
It’s been four years since Fearless Girl, the bronze statue commissioned by the State Street Global Advisors wealth management group, was constructed in New York to promote women’s role in business and finance. Nevertheless, the young rebel created by the sculptor Kristen Visbal – who boldly stands, wide-eyed looking at the New York Stock Exchange – still has a long way to go to fulfill her mission.
The sculpture was designed to encourage female empowerment and as a reminder for finance, a predominantly male sector, to hire more women. Its symbolic location sparked a debate on the role of women, particularly in the financial professions, and underlined the importance of self-confidence, especially when moving to the field of finance and investments.
We know that many gender gaps persist. From wage gaps to poor representation in corporate boards, we are aware that there is an overall lack of female leaders. However, an important gap that puts us women in a very disadvantageous position is precisely that of financial literacy.
It all starts with financial inclusion, that is, the ability of individuals and businesses to access the financial products they need. Globally, only 47% of women versus 55% of men have access to a financial institution. S&P Global, in the survey which measures the level of financial literacy around the world, i.e. the knowledge and skills to make financial decisions, found that 35% of men are financially literate, while only 30% of women are.
Also according to this study, there are large differences between advanced and emerging economies. In the advanced ones, more than 1 in 2 people are financially literate, but it is interesting to note that the gender gap is wider. In Germany, the gap is over 10% and in Canada it is close to 20%, despite the very high overall level of literacy. There are some countries where this gap is reversed, such as the UK and Japan, but the difference between men and women is almost irrelevant.
It is well known that financial literacy is important for our economic well-being, and the quality of our financial choices is a clear result. For example, the most prepared save more and invest better, and they do not run into the so-called financial fragility, that is the risk of not being able to cope with unexpected medium-sized expenses. Furthermore, in the long run, the more literate are less financially vulnerable at an old age.
But what are the reasons for this gender gap? According to a group of scholars and authors of the recent study Fearless Woman: Financial Literacy and Stock Market Participation, the question we must ask ourselves is another, namely “is it true that women know less than men when it comes to managing their savings? ” The answer that is given is:
“‘When we measure financial knowledge, looking at how much people know about the basics of finance, we find that women know less than men.’ Yet, when further analyzed, female’s lower scores demonstrate something different. Women choose more often than men not to answer questionnaires at all, and opt for the don’t know answer. And this ‘no answer’ unites women of all countries. ‘I drew simple questions of financial knowledge and I asked these questions to women all over the world – says the professor – and the answer has always been extraordinarily the same: whether you ask yourself these questions in the United States, in Italy, in Brazil or in Australia, women respond in the same way; they say they don’t know. ‘ A suspicion has therefore arisen among scholars: could it be that that cautious answer does not indicate a lack of knowledge, but also of confidence in one’s own preparation?”
So, they tracked down the interviewees with a trick. They removed the “I don’t know” option from the multiple-choice answers. Faced with an obligatory choice, women gave, in most cases, the right answer. Being cautious in your financial choices is wise, but excessive caution has undesirable effects. In fact, the study shows that this caution/insecurity leads women to not invest in the financial markets and, in particular, in the stock market.
It clearly emerges that financial literacy, if seen only as knowledge of concepts, will not be enough to change this situation. We women must grow in the ability to use what we know, without fear!
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Taking what we now know about women’s doubtful tendencies, we are able to recognize this within ourselves and act upon it. As women, whether on the work field or at university, we must work towards encouraging one another to be more secure with our financial choices and lead with fearlessness.
Featured image by: CNN
