Women and financial literacy: Closing the gender gap

Financial literacy is a critical tool for women to build wealth and secure their future. However, many women lack the knowledge they need to get ahead. We explore why that’s the case!

10 min read

The past few decades have seen tremendous strides towards true equality for women — but there’s still work to be done. Women in Europe earn 12.7% less than their male counterparts. They’re more likely to experience on-the-job discrimination, and to work in industries where their work is underpaid. They’re also, on average, less financially literate than men. 

Financial literacy is widely considered an important key to achieving gender parity. The more women know about finance, from budgeting to investment, the more likely they are to be able to make solid decisions when it comes to money. However, data shows that women across the globe are less financially literate than their male counterparts — a phenomenon known as the financial literacy gender gap. The problem isn’t individual, it’s structural: rooted in history, politics, and culture. 

But things are changing, and there’s plenty of momentum towards leveling the playing field. Here, we dig into the financial literacy gender gap, what caused it, and how we can combat it together. 

Understanding the financial literacy gender gap

What is financial literacy? 

Financial literacy is the ability to understand and effectively apply various financial skills to your life. These include personal finance, budgeting, saving, and investing. 

Financial literacy can be as simple as understanding how to manage a household budget. But it extends well beyond that to debt management, taking out a loan, retirement planning, investing, and understanding more complex financial concepts like compound interest. 

Why is financial literacy so important? 

Our financial wellbeing rests on our ability to educate ourselves, parse good advice from bad, and take charge of our money. The more financially literate you are, the more opportunities you’ll have to build wealth and set yourself up for success over the long term. Typically, people who know more about finance save more for retirement, are wealthier, and are able to invest competently. They’re also less likely to make risky financial choices, or to become victims of financial fraud. 

For women, poor financial literacy can mean struggling to manage money well, take advantage of financial products to grow wealth, build an emergency fund, or even set up a small business. All this inhibits financial independence, which helps women weather unexpected events, feel more secure, and not have to rely on a partner or parent for support. 

The financial literacy gender gap: What the numbers tell us

Across the world, women score lower on financial literacy tests than men. According to a 2020 study by the OECD, on average, men score higher in financial literacy tests than women by 4 points out of 100. However, in some countries, the difference is larger than 10 points. Out of the 16 countries studied, there wasn’t a single country where women performed higher than men. 

A 2022 TIAA Institute of financial literacy survey on US women found that women answered an average of only 45% of personal finance questions correctly, whereas men fared significantly better, with 55% correct on average. And things look comparable in Europe: A 2023 study by Allianz of seven European countries found that women averaged a score of 3.7 out of 9 questions correct, while men averaged 4.5. 

The Allianz study suggests that some levels of financial literacy come down to who is making the household financial decisions. They found that in countries where women make more financial decisions, their financial literacy was higher.

The gap in financial literacy also has implications for saving, budgeting, and investing. N26 found that women invest 29% less than their male counterparts — with a lack of money noted as the biggest obstacle for 45% of investing women and 54% of non-investing women. Here, again, education appears to play a role: Less than half (48%) of all women who invest consider themselves knowledgeable about investing — compared to 59% of men. 

What’s at the root of the financial literacy gender gap? 

It’s clear that men and women have different levels of financial literacy, broadly speaking. But understanding why the gap exists is crucial to developing policies and strategies to reduce it. Here are five reasons why the problem exists.

Access and education 

If you zoom out, the gap in financial literacy is part of a broader story about the privileges afforded men and women in society. Women couldn’t open a bank account until 1958 in Germany, 1965 in France, and 1975 in Spain. Additionally, they were often excluded from the workforce, discriminated against in the education system, and expected to stay home to raise a family. 

Things have changed since then, but this history can tell us a lot about why women may have lower financial literacy than men. When generation after generation of men are tasked with managing money while women are left out, broad implications loom for societies at large. 

And the situation isn’t changing as fast as it should. According to the European Consumer Payments Report, as of 2021, 26% of women feel they didn’t receive adequate financial education to make decisions, compared to just 19% of men. Even parents teach their male children more about money than their female children. A 2017 study also revealed that girls receive an astounding 20% less in pocket money from their parents than boys do — setting a damaging precedent for young women’s self-worth and money dealings later in life. 

The gender wealth gap

People who are more financially literate are also more wealthy. But neither wealth nor financial literacy exists in a vacuum. They’re determined, at least in part, by gaps in how we distribute wealth. 

In Europe, women earn almost 13% less than men, on average — and the gender wealth gap is also substantial. According to a 2019 study by Credit Suisse, over a lifetime women accumulate €100,000 less in wealth on average than men. Despite earning less, women have a longer lifespan on average than their male counterparts. However, given the gender pay gap, plus the fact that it’s more common to leave the workforce to raise a family, women are at higher risk of having financial problems and approaching retirement with insufficient savings. 

Women are also less represented in leadership roles, especially in the field of finance. This is particularly the case for LGBTQ folks and minority women. The lack of exposure to financial dealings common in leadership roles may also contribute to lower rates of financial literacy among women.

Lack of confidence

Studies repeatedly show that women lack confidence when it comes to financial literacy — even when they know plenty about the topic. A 2021 study by the Global Financial Literacy Excellence Center found that women tend to answer a financial literacy question disproportionately with “do not know.” 

Interestingly, when that answer option was removed, they often chose the correct answer. This indicates, as suggested in a 2021 study by the Global Financial Literacy Excellence Center, that a large portion of the financial knowledge gap comes down to a lack of confidence rather than a lack of knowledge.   

This isn’t surprising: Women are socialized to minimize their knowledge. And because finance is generally considered to be a male-dominated field, women may not feel as confident in their abilities. However, this lack of confidence has measurable consequences for women’s financial behavior, income, and wealth. For example, women are less likely than men to ask for a raise or fight for the salaries they deserve.

Outdated gender norms

58% of married women in heterosexual relationships tend to defer financial planning decisions to their male partners — regardless of whether they’re the primary breadwinner or not. It stands to reason that if men specialize in financial decision-making both inside and outside the home, they’ll likely gain more financial literacy. 

But outdated gender norms present another problem for financial literacy in the form of the care gap. Data shows that working women spend more of their lives on care work responsibilities — a phenomenon known as the motherhood penalty. 

The more time women spend on caring for children or aging parents, the less time they have to pursue earning and income and education on financial topics, leaving them less financially literate and more dependent on their partners for monetary security. All this has dire consequences, with women 80% more likely than men to retire in poverty.

Harmful stereotypes 

Many women have been primed to feel that they don’t have the knowledge to manage their finances. Cultural stereotypes like gold digger, shopaholic, and of course, the new (and befuddling) girl math have a cumulative effect on women’s self-worth, making them believe that they’re doomed to be bad with money. They also create permission structures for women to not be financially savvy because, well, they just can’t help themselves. 

There’s research to back this up, too. A 2021 study shows that the “stereotype threat” is a long-standing contributor to both racial and gender gaps in academic performance. One component of the study showed that girls who received negative information about gender-based performance before a test did worse on it than those in the control group. 

The more we perpetuate the toxic myths that women are bad at math, driven to marry for money, or can’t control their impulse to shop, the more we hamstring them — psychologically and socially — from achieving true financial success. 

A roadmap for supporting women in becoming more financially literate

As you can see, the roots of the financial literacy gender gap are complex. And while there’s no one way to close this gap, there are things we can do — individually and collectively — to change things for the better. 

The most important thing you can do on a personal level is to bridge the gaps in your own financial literacy and ensure your finances are on track. Make sure you have a solid budget in place, as well as an emergency fund, and are doing what you can to save for retirement. Seek out opportunities to further educate yourself by attending webinars, meetups, and other financial resources geared toward empowering women. 

Another important way to improve your financial literacy is to talk more openly about money. The more we shy away from talking about our finances, the easier it is to fall into unhealthy patterns. Furthermore, discussing your finances with your peers can shed light on inequities and give you the confidence to take charge of your financial future — whether that means pursuing a raise, learning about investing, or working towards another financial goal. 

Collectively, promoting financial literacy starts with improving education for women of all ages. Parents and teachers in particular should reinforce girls’ interest in finance so that they can start out with a sense of self-confidence when it comes to money. 

Thanks to research out of Thailand, we know that the lower the gender wage and wealth gaps are, the better financial literacy is among women. These aren't issues that we can tackle alone. However, we can make our voices heard and advocate for policies like equal pay for equal work, paid parental leave, affordable childcare, and better financial education for all. 

Finally, don’t let anyone make you feel disempowered when it comes to your finances. We deserve a world that gives us an equal shot at financial success. And that’s something we can work towards together. 

Learn more about women and finance

Want to learn more about gender equality and finance? Our blog features a variety of articles designed to educate, empower, and inspire. Read interviews with financial experts like Nazila Jafari, Patrizia Laeri, and Finanzfreundinnen — and explore articles on financial independence or investing for women. You can also browse topics like how much to save for retirement, tips for salary negotiations, and much more. 

By N26

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