Women’s Financial Literacy

 In Finance Women In The Media, News

Yesterday I was interviewed for SBS World News to comment low levels of low levels of women’s financial literacy reported in the Household, Income and Labour Dynamics in Australia (HILDA) Survey run by the University of Melbourne*. Only 35% of women were able to answer every one of the 5 questions correctly, by comparison 50% of men were able to answer all question correctly.

Are these results a surprise? Well Yes and No

It is disappointing that women experience lower levels of financial literacy, and I don’t think I am alone at being surprised by apparent the size of the gap. However in the broader context it’s not completely unexpected. The survey data looks at observations and various associated linkages. The survey isn’t able to drill down to cause and effect but they observe that income, wealth, educational attainment and full-time employment status are associated with higher levels of financial literacy. There are three potential explanations that seem plausible to me.

Firstly, while women’s level of educational attainment is closely matched and often surpasses that of men, when it comes to income levels women are at a distinct disadvantage. Can we be surprised that segments of the population on lower incomes have less capacity to save, less experience investing and have reduced access to financial advice and education.

Secondly, women are much more likely to report poor experiences when accessing financial services. It is not uncommon for single women find they are dismissed for not having enough funds to invest or be scolded for leaving it too late. Those in couples don’t fare much better, finding that their male partners are the sole point of contact for financial affairs, meaning the male’s priorities, perspectives and concerns are prioritised. When women find their access to financial information and advice is curtailed at every point it can hardly be a surprise that their familiarity and competence in these basic areas suffer.

Thirdly, there are a range of subtle cultural forces at play that reinforce these outcomes. Women are much less likely to talk about investments with their friends than men. Is this a remnant of lingering gender norms making talk of money a taboo or reflective of a lack of confidence in their own financial literacy ? We also find that couples tend to specialise within relationships. While it’s probably not a problem if only one member of the couple has learned to reset the central heating timer, the drift of financial decision making can be much more dangerous. Through the best of intentions a couple can find that a relationship that started out as reasonably egalitarian and equitable financially can slip over time into a significant power imbalance. It might start out as a simple efficiency where one member of the couple does the tax return and talks to the accountant. Over time, bit by bit, and quite unintentionally, a couple can find that someone has become the primary decision maker. All questions and decisions go through them, and the voice and the involvement of the other partner is lost. If you’ve been left out of the loop, it’s not a surprise that your engagement in the process is reduced and your familiarity and comfort in important financial decisions suffers.

Could it be a problem with confidence rather than competence?

It is interesting to note that the researchers observed that women were much more likely to answer ‘don’t know’ to financial literacy questions. The proportion of incorrect responses were similar for men and women, but women were much more likely to respond don’t know. This reinforces a key belief of mine that while financial literacy is key, financial confidence for women is just as important. The researchers note that one possible explanation is that men and women have similar levels of competency, but women are much less likely to be confident in their knowledge. Whatever the reason we need to ensure that women are better equipped to competently and comfortably navigate their finances.

Is the news all bad? Not at all,

Men and women were very similar in their assessment of their financial management capabilities. Scoring on average 5 out of 7 for their self-reports on their confidence in decision making, keeping a close personal watch on their financial affairs. Women were more likely to report they were organised when it comes to managing their day-to-day money  and doing a good job of balancing spending and savings, but a little less likely to feel comfortable dealing with banks.

Similarly there was very little to split men and women when it came to their tendency to be future oriented, impulsive or motivated towards achievement of goal.

What can we do?

Government and industry have a key role to play in ensuring that good quality financial advice and education is accessible; that structural barriers to equality and inclusion are dismantled and that we don’t have punitive rules that trap individuals in cycles of poverty and disadvantage. We all need to take an active role in holding institutions and our elected representatives to account. But what else can we do for ourselves and each other?

As individuals:

  • Take an interest in your finances, it’s not as scary or as overwhelming as you might fear
  • Go and seek information and advice – Don’t feel ashamed if your financial circumstances or your financial knowledge are not where you would like them to be
  • If you don’t feel comfortable with the experience you are getting, find someone else to help you, there are many avenues for advice out there, and they are not all the same.

Within our social networks:

  • Don’t avoid the topic – talk to your friends and family members about the financial matters whether from budgeting to investing. Just knowing others are facing similar issues to you can be very reassuring and empowering
  • Talk to young people about money and investing (especially the young girls in your life), not just parents but grandparents, aunts, uncles & family friends. Even if you don’t feel like an expert, normalising these conversations will help them feel more confident in their financial decision making the future. If you don’t know the answer to their questions then perhaps you can go and find out together.
  • Even if finances aren’t tight for you (and perhaps especially if they aren’t), be open to the possibility that family and friends might be doing it tough. Providing affordable social options for everyone is really important for our community, even amongst social friendship groups.


Financial Literacy QuizInterested in taking the test yourself?

Test your Financial Literacy




* This is a highly regarded longitudinal study of Australians across a wide range of areas from household and family relationship, income and employment to health and education. The unique design of this survey follows the participants over their lifetimes and across a rich data set. The survey brought a up few key headlines on trends in housework, workforce participation, wage growth, childcare and energy costs. You read the full report at https://melbourneinstitute.unimelb.edu.au/__data/assets/pdf_file/0005/2839919/2018-HILDA-SR-for-web.pdf


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