Here’s a funny story:
When Bob found out he was going to inherit a fortune when his sickly father died, he decided he needed a woman to enjoy it with. So one evening he went to a singles bar where he spotted the most beautiful woman he had ever seen.
Her natural beauty took his breath away. “I may look like just an ordinary man,” he said as he walked up to her, “but in just a week or two my father will die, and I’ll inherit 20 million dollars.”
Impressed, the woman went home with him that evening.
Three days later, she became his stepmother.
Funny, right? It is also a perfect anecdote that illustrates that women are smarter than men when it comes to finances.
Well, are they?
Here is a summary of some statistics I found about women and money. The studies are US-based but they can just very well apply to us here.
- Women are in charge. No surprise here. Women are more involved than men when it comes to household finances. In fact, 95% of women are the financial decision-makers in their family. Within a household, women are more likely than men to pay the bills (60%), balance the checkbook (67%), and maintain the family budget (54%).
- Women earn less. Research shows women still earn less than men, on average, and work more intermittently. That’s due to the baby factor, as many women exit the workforce when they have children. By age 45, full-time working women average 3.2 fewer years of work experience than men, so they build up less in retirement savings and seniority.
- Women do not feel secure. A startling 90% of women interviewed by life insurer Allianz said they feel somewhat or not at all financially secure. Men are far more likely than women to feel they have control over their financial lives. While women want to preserve their assets, men figure that if they lose money they can always make it back.
- Women are not as confident. They are less confident about making financial decisions and do not fully understand many of the increasingly sophisticated financial products that are available. Most of women polled (86%) believe that they do not know how to choose financial products. In a recent study by Oppenheimer Funds, more than 60% of the women interviewed said they don’t know how a mutual fund works, versus 41% of men. Financial institutions should, therefore, tweak their marketing messages specifically to women.
- Women invest less. Only 25% of women – versus 44% of men – are responsible for buying and selling stocks, bonds, and mutual funds. Men actually traded 45% more often than women – a result they attributed to overconfidence. That’s partly because of their lack of confidence about investing and also because of their more conservative nature.
- Women are more conservative. Another survey by Merrill Lynch found that women don’t enjoy investing as much as men and aren’t as likely to try to beat the market. When brokerage firm Charles Schwab looked at the portfolios of its clients, it found that women were more likely than men to have money in bank certificates of deposit.
- Women perform better. Although they are more conservative investors, they may outperform men when it comes to investing. In a study of investors at a large discount-brokerage firm during the 1990s, a University of California at Davis study found that women investors outperformed their male counterparts. Women are more likely to do research before they make an investment decision, rather than to gamble on a highflier. Once they decide on a stock, they’re more likely to stick with it. They trade less often, which means lower commission costs, and therefore better returns.
So what do these all mean? For families, recognize that moms do make most of the financial decisions related particularly to the household budget. For investment decisions, the dynamics are a little more complicated. Husbands and wives may want to invest together to balance out their extreme confidence and conservatism. Or you can compromise by allocating funds for more conservative, long-term instruments but also setting aside some fun money for riskier but potentially higher return investments.
Photo by rawpixel.com on Unsplash
