Why do we cling to the myth that women don’t understand money as well as men?
If you look at the personal finance books aimed at women over the past decade, some of the titles might convince you that women need “special help” when it comes to figuring out saving, investing and budgeting: Prince Charming Isn’t Coming … SHOO, Jimmy Choo! The Modern Girl’s Guide to Spending Less and Saving More … Does This Make My Assets Look Fat? … Girl, Get Your Money Straight … A Purse of Your Own: An Easy Guide to Financial Security.
Judging by these titles, you would think American women are naive shopaholics or flat-out squanderers. But is that really the case?
Data suggests men spend more than women. Intuit’s Consumer Spending Index (which is compiled using real-time data from its Mint.com personal finance app) shows that men regularly spend $600-700 more a month than women do. For example, in Q1 2013, men spent 37% more on alcohol than women, 27% more on entertainment, and 29% on eating out. Women spent 21% more than men on clothing and apparel, but that was the only category where women outspent men.
Do women run wild at the mall? This is another myth that deserves shattering. A study out of Stanford University published in the American Journal of Psychiatry finds no real difference between genders when it comes to runaway buying. Roughly 6% of females studied by the Stanford researchers were compulsive shoppers versus about 5.5% of the men.
Are women better investors than men? One often-cited study suggests just that. University of California, Berkeley professor Terrence Odean and University of California, Davis professor Brad Barber analyzed investing patterns across 35,000 households that traded stocks through a major discount brokerage. They looked at seven years of data. Their conclusion: women trade less and get better returns as a consequence. Male investors, Odean and Barber found, traded 45% more than women investors, and all that jumping in and out of stocks lowered their net returns by an average of 2.65% annually. The women investors traded with less frequency and their returns were only hurt an average of 1.72% per year as a result.
Other surveys find women prioritizing savings & debt reduction. A global survey out in March 2014 from BlackRock (12 nations, 17,500+ respondents) discovered that women assign greater priority to paying off home loans (30% of women vs. 26% of men), paying off consumer debts (49% to 42%), saving up the down payment for a new home (15% vs. 11%), and funding education for their kids (21% to 18%).
As a Barron’s article recently noted, wealthy women may be a bit less cavalier with their money than their male counterparts. In winter 2014, The Shullman Research Center surveyed male and female millionaires and learned that more than two-thirds of men wanted to buy one or more luxury items in the coming 12 months, while just 44% of women did.
The real issue is unequal income. The pay gap between men and women in America is slowly narrowing but still present. According to the Pew Research Center, the average woman now earns 84% of what the average man earns; for young women, the gap is even less at 93%. Still, this income differential has a troubling later-life impact: as women tend to live longer than men, women will tend to outlive their husbands more often than not. At some point in their lives, many women will be solely responsible for their financial situation – and that calls for sufficient financial knowledge.
There is no need for condescension; there is a need for comprehension. Women do need to realize the financial challenges that come with potentially longer life spans and potential absences from the workforce, and plan accordingly – but it is time to ditch the old stereotypes and myths.
About the Independent Financial Advisor
Robert Pagliarini, PhD, CFP®, EA has helped clients across the United States manage, grow, and preserve their wealth for the past 25 years. His goal is to provide comprehensive financial, investment, and tax advice in a way that was honest and ethical. In addition, he is a CFP® Board Ambassador, one of only 50 in the country, and a real fiduciary. In his spare time, he writes personal finance books, finance articles for Forbes and develops email and video financial courses to help educate others. With decades of experience as a financial advisor, the media often calls on him for his expertise. Contact Robert today to learn more about his financial planning services.