I remember the first time I had a job that offered a 401(k) with an employer match. I had questions: Were the management fees tied to the fund too high? Does it make sense to invest in my 401(k) beyond the amount my employer would match? What happens if I change jobs? How exactly does a rollover work?
The only peers in my circle who seemed ok with talking about this? Men. I wondered if at some point all the men I knew had been ushered into a secret class about financial planning and investments, and my female friends and I had just been targeted for storylines about the cliché of Carrie Bradshaw–esque women overspending on shoes and handbags.
It turns out that I wasn’t entirely wrong. While there is no secret school of Financial Planning for Men (at least not that I’ve discovered and infiltrated), men and women have been sent different messages about money. It’s not in your head.
Language Matters: Differences in Money Messages
A study on semiotics and cultural value assessed 300 articles from a mix of outlets aimed at men and women. Using discourse analysis, the study found that:
- 65% of articles define women as excessive spenders, advising them to limit shopping “splurges,” save small sums or depend on financial support.1
- 90% of female-targeted articles tell women to “cut back” in small ways, such as going out less or seeking out coupons or bargains.2
- 60% of financial articles in male magazines recommend investment apps to men, speaking to them as savvy financiers, offering advice on the best tech to enhance their portfolios.3
- 70% of articles aimed at men emphasize the idea that “money makes the man,” that making money is a masculine ideal, and that monetary success and financial literacy enhance men’s personal status.4
While women are spoken of as spenders, men are spoken of as earners. While women are frivolous, men are empowered. While men are told to invest, women are told to spend less.
Marketers have made a choice to speak to us differently about money. We can make a choice not to listen—and instead—to invest in our futures, starting today.
Women as Investors: It’s a Win
Partially as a result of being spoken down to about money in these limiting ways, women don’t feel as confident as men about their ability to make financial decisions. Women are equally confident to men in most financial tasks except for investing. Only half of women say they feel confident in managing their investments.5 In addition, women associate financial planning with caretaking, with 77% of women stating that they see their money in terms of what it can do for their families.6 For many, this means they feel a pressure to “get it right” for the sake of others. This pressure can make any type of risk, such as investing, seem like a dangerous choice. As we’ll learn in a future article, however, choosing to just keep all your money in savings can sometimes be riskier than choosing to invest in a diverse portfolio.
Recent research has demonstrated that this gender gap in financial knowledge has nothing to do with innate abilities and everything to do with opportunity. The millennial generation serves as a great case study for what happens when women do pursue opportunities to educate themselves about finances: As this generation has been getting married later, fewer women are deferring financial decisions to a partner, and instead are gaining financial knowledge on their own.7 When given the opportunity to pursue a financial education, women outperform their male peers on financial literacy tests.8 Reviewing the results of a financial literacy quiz, 33% of millennial women correctly match financial terms compared to 24% of men their age.9 When asked if they completely understood financial and insurance-related terms, only 14% of millennial women said they did, but more than twice that percentage correctly identified the terms. Meanwhile, 34% of men thought they had the right answers when, in reality, less than half of them did.10
"While women are spoken of as spenders, men are spoken of as earners. While women are frivolous, men are empowered. While men are told to invest, women are told to spend less."
The Future Is Female
What’s even more encouraging? Women investors are also outperforming their male peers. A study by the Warwick Business School found that women outperformed men at investing by 1.8%.11 Women appear to avoid “lottery style” trading and are more likely to focus on shares with good track records.12 A separate 2001 study from the Quarterly Journal of Economics found that accounts owned by women outperformed those owned by men because women traded a whopping 69% less than men and incurred less in trading costs.13 The research indicates that men traded more because they exhibited overconfidence in their ability.
Fortunately, the financial industry is beginning to understand the importance of women’s wealth, and advisors are intentionally becoming more inclusive. An array of products and services now exist to accommodate your risk tolerance, long-term goals and values. In the next articles, we look at how to follow in the footsteps of those who have already found investing success by diversifying their portfolio and building a successful relationship with their advisor.
This is our chance to disrupt the notion that we cannot be in charge of our earnings. This is our chance to undo choices that others thought they made for us and write our own story instead.
Investing involves risk and possible loss of principal.
The opinions and forecasts expressed are those of the author and individuals quoted and should not be construed as a recommendation or as complete.