Two women working outside.

Busting the toxic myth that women are bad with money

Harmful stereotypes about women being bad with money are fiction, not fact. Learn where this idea came from and why it’s time to change the narrative.

5 min read

Prone to impulse shopping, can’t spot a good investment, doesn’t understand crypto? The stereotype that women are bad with money exists in many subtle and not-so-subtle forms in western societies. But according to the data, this idea is fiction, not fact. And fortunately, things are changing: An increasing number of women are investing, enjoying more wealth, and becoming more financially confident. It’s time to put the negative stereotypes in the past — where they belong.

Women in the workforce

To understand where the stereotype comes from, we first need to look at the history of women and work. During the 19th century, most women in middle- and upper-class households in the west weren’t employed, though many working-class women had no choice but to earn a meager living in the factories. However, during World War I and World War II, millions of women entered the workforce to fill the roles left by men sent to war — although their wages were significantly lower.   

At the end of World War II, women had proven that they’re capable of occupying more positions than ever before. But in much of the world, the idea that the woman’s role was in the home persisted, largely keeping money in the hands of men. Progress was being made — but slowly. When the EU was formed, equal pay for both men and women was one of its founding principles. Yet as recently as the ‘60s and ‘70s, many women still had to get a signature from their husband or father before they could secure a bank loan. 

Historical gender norms — and myth-busting data

Historically, the barriers to becoming financially independent have been twofold for women. First, their job prospects have often been restricted to lower-paying careers. And second, women have long been paid less than their male counterparts in many industries. This has given many men a considerable advantage in both accessing and managing money. Ultimately, this is a kind of gatekeeping that blocks women from money. The result? It’s easy to perpetuate the social myth that women are financially frivolous — they have little opportunity to prove otherwise. In large part, this is why the stereotype that women are bad with money has persisted and why we can still see traces of it in western media today.

The data tells a different story. Women are more likely to have a clear picture of their finances and spend less on impulse purchases than men. This makes it easier for women to stick to a budget and avoid overspending. Additionally, women contribute a higher percentage of their income to their retirement savings — but because they earn significantly less than men, they retire with less money overall.

How stereotypes impact behavior

Stereotypes are harmful for a multitude of reasons, from provoking discrimination against particular groups and shaping unjust policies to informing culture and the media we consume. Many young girls grow up believing that men are better at math and, therefore, at managing money, than women. Being socialized to believe stereotypes like these can quickly become a negative self-fulfilling prophecy. In a 2017 study of 179 women, researchers at Drake University found that participants performed more poorly on cognitive tests if they were primed with concepts of femininity and money. Likewise, in a 2021 study, researchers discovered that the stereotype that women are bad with money increased financial anxiety in women, which ultimately increased the gender gap in financial literacy. 

All of this means that many women internalize the myth that they are inherently bad with money. This reinforces the stereotype and creates a domino effect: Many women feel less financially confident, shy away from financial resources, and don’t develop their financial literacy, which leaves them feeling less financially confident … you get the idea! Plus, European women make 13% less than men on average — with a significantly wider gap for women of color. It’s clear that access to money, resources, and financial representation remains a pressing issue today. The good news? Things are beginning to shift.

How women are changing the financial landscape

Although women still make considerably less than men overall, things have been changing in recent decades. According to a 2021 report from Fidelity, 67% of women are now investing outside of retirement – a huge increase of 23% since 2018. In addition, while only 9% of women think they make better investments than men, women’s portfolios actually perform 0.4% better than men’s on average. That might not sound like much, but when adjusted for the effects of compound interest, the difference can really add up. Though women tend to invest smarter than men, overall they invest less. But, a study from BNY Mellon states that if women were to invest as much as men, assets under management would increase by a staggering $3.22 billion worldwide!

Not only are women investing more, but they’re also acquiring more wealth. This is largely due to a steady increase in the number of women entrepreneurs and women in upper management roles. In 2022, the number of director roles held by women on the boards of the S&P 500 rose to 32%, the highest percentage to date. A third of the world’s total wealth is now owned by women, and women are adding $5 trillion to the global wealth pool annually, outpacing the growth of the wealth market overall. 

As the barriers to entry are eroded, many women are now able to navigate and manage their finances better than ever before. Still, it’s important to note that women of color face more ongoing barriers to financial independence than white women. An increasing number of resources are cropping up that speak to financial empowerment for non-white women — but even more representation and support are needed.

Your money at N26

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