Gender Differences in Financial Literacy: Empowering Women

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Gender Differences in Financial Literacy: Empowering Women. Annamaria Lusardi presentation at The Partnering to Turn Financial Literacy into Action FCAC & OECD conference in Toronto, on May 28, 2011.


  • 1. Gender Differences in Financial Literacy: Empowering Women Presentation to the OECD-FCAC Conference Toronto, May 26, 2011 Annamaria Lusardi GW School of Business Director, Financial Literacy Center
  • 2. RelevanceA new economic landscape Individuals are increasingly in charge of their financial well-being Changes in the pension landscape More individual accounts Changes in the labor markets Increased mobility Changes in the financial markets Increased complexity. Not many women work in finance
  • 3. How do women fare?Women have specific needsWomen live longer than men, thus savings need to last a long timeBecause of shorter labor market tenures, women are less likely to have pensions or to have experience with pensions.Women are a vulnerable groupDeath of a spouse often precipitates women into poverty (Willis and Weir, 2000)
  • 4. QuestionDo women know the basic concepts needed tomake financial decisions?Aim: Assess knowledge of basic concepts, the abcs of financial knowledgeThe journey of 3 simple questions
  • 5. Measuring Financial Literacy (I)To test numeracy and understanding of interestrates, we asked:Suppose you had $100 in a savings account and the interestrate was 2% per year. After 5 years, how much do you thinkyou would have in the account if you left the money to grow? i) more than $102 ii) exactly $102 iii) less than $102 iv) dont know (DK) v) refuse to answer
  • 6. Measuring Financial Literacy (II)To test understanding of inflation, we asked:Imagine that the interest rate on your savings account was1% per year and inflation was 2% per year. After 1 year, withthe money in this account, would you be able to buy i) more than today ii) exactly the same as today iii) less than today iv) DK v) Refuse to answer
  • 7. Measuring Financial Literacy (III)Finally, to test understanding of riskdiversification, we asked:Do you think the following statement is true or false? Buyinga single company stock usually provides a safer return than astock mutual fund. i) true ii) false iii) DK iv) Refuse to answer
  • 8. Financial Literacy around the World (FLatWorld) These questions have been added to national surveys in The Netherlands Germany Italy Sweden Russia New Zealand Japan
  • 9. Financial Literacy and Gender: U.S. data (age:50+) 90.00% 80.00% 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Compound Interest Inflation Stock risk Male 74.70% 82.20% 59.30% Female 61.90% 70.50% 47.50%
  • 10. Financial Literacy and Gender: U.S. Data (age:23-28) 90% 82% 80% 77% 70% 60% 60% 53% 50% 48% 40% 40% 30% 20% 10% 0% Interest Rate Inflation Risk Diversification Male Female
  • 11. Do Not Know Responses by Gender (age: 23-28) 50% 47% 45% 40% 35% 30% 29% 25% 20% 20% 15% 11% 10% 8% 5% 4% 0% Interest Rate Inflation Risk Diversification Male Female
  • 12. Gender Differences in Self-ReportedLiteracy (U.S. data )On a scale of 1(very low) to 7 (very high), how would you assess your overall financial knowledge?35% Male30% Female25%20%15%10%5%0% 1 = Very low 2 3 4 5 6 7 = Very High Do not know Prefer not to answer
  • 13. Similar Findings in Other CountriesIn all countries, women have a tendency to state that they donot know the answer Women are aware of their lack of knowledgeNo gender differences in East Germany and Russia Financial literacy is equally low between women and men With developed financial markets, women are left behindNo gender differences among indigenous population in NewZealand Relationship with norms and culture
  • 14. Linking Financial Literacy to Financial Behavior Debt and debt management Investments Planning and wealth accumulation
  • 15. Financial Literacy in High SchoolThe small proportion of high school students (7%) in theUnited States who are financially knowledgeable are Male From college educated families Lack of financial knowledge starts at a young ageOECD Programme for International Student Assessment(PISA) Measure financial literacy among 15-year-old students in 19 countries in 2012
  • 16. Our Financial Literacy Center (FLC) Build on many years of research on financial literacy Bring together three institutions with expertise in pensions, saving, data collection, and program evaluation Bring together multi-disciplinary teams of researchers We have several programs targeted to women
  • 17. Video Game: Celebrity CalamityProject with Doorways to Dreams (founder is Peter Tufano from Harvard Business School)
  • 18. Initiatives for College Students Designing financial literacy modules Building financial literacy content in college courses
  • 19. Evaluate a Financial Bootcamp for Women
  • 20. Concluding Comments Financial literacy is a necessary skill, like reading and writing Need to equip women with tools to make decisions - Women around the world are increasingly in charge of their financial well-being Cost of financial illiteracy at both the individual and the macro level - The importance of financial education