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Is Personal Finance Gender-Neutral?

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Women's Day: Is Personal Finance Gender-Neutral? Today is International Women’s Day, a day that’s often devoted to commemorating the accomplishments of women, including their economic, social and political achievements. As a personal finance blogger, my professional interest is, of course, in the first topic: in particular, how women are doing financially.

There’s no doubt that compared with men, women have their work cut out for them when it comes to managing and planning their financial lives. For example, it’s well-documented that:

  • Women generally earn less for the same work as men. Usually that translates to women earning about 80% of what men earn for similar jobs.
  • Women live longer, which means they need greater financial resources in retirement. At age 85, there are twice as many women as men. On average, women who reach age 65 can expect to live almost 20 more years, and predictions indicate that nearly one third of women who reach age 65 can expect to reach age 90, according to the National Education and Resource Center on Women and Retirement Planning.
  • Women are likely to be charged more — 30% to 50% more — than men for everyday products. These include such mundane items as shaving cream, haircuts, body wash and even pain relievers, according to Consumer Reports. The same goes for big-ticket items like home loans or cars, according to the Consumer Federation of America.

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Overall, when it comes to personal financial planning, “the gender gap is widening, with women falling further behind in many key areas of financial planning, most notably money management and investing,” says Financial Finesse in its 2012 report on the gender gap in personal financial literacy.

There is a danger, of course, in lumping people together by gender. Any discussion of women vs. men is likely to touch upon stereotypes that may seem condescending to some. (For the record: I hate shopping for shoes.)

And there’s plenty of valid criticism of the idea that we even feel the need to talk about financial management specifically for women. An article by Hannah Seligson in Slate, for example, took a jab at the “women as shopaholics” myth and questioned “why so many financial advice books perpetuate the false notion that women are bad with money.”

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Yet there is no denying that numerous surveys have found a difference in women’s attitudes about money compared to men. The question is whether those different attitudes are a help or hindrance, and what we can learn from them.

For example, take the fact that women generally report being less confident about their finances than men. Just one example: Prudential’s 2012-2013 survey, Financial Experience and Behavior Among Women, women said they are far less confident that they will meet their financial goals and feel less prepared to make wise financial decisions than men. They are twice as likely as men to describe themselves as financial “beginners” (15% of women vs. 7% of men).

A lack of confidence can be problematic if women aren’t taking enough investment risk to make their money last throughout retirement, for example, or if they are putting off crucial financial planning tasks as a result. For example, Financial Finesse found that only 25% of women reported rebalancing their investment accounts to keep their asset allocation plans on track, compared to 49% of men.

[Related Article: Women More Inclined to Take Financial Advice Than Men]

But that lack of confidence can also be a benefit. Women are also less overconfident, or “irrationally confident,” in most areas, according to research from Barclays Wealth. For example: Female investors are less likely to overtrade their investment accounts. One study in The Quarterly Journal of Economics found that men trade 45% more than women. Trading reduces men’s net returns by 2.65 percentage points a year as opposed to 1.72 percentage points for women.

Despite that lower level of confidence, women want to be involved in making important decisions about their future. The Barclays Wealth report found that, “Though women often express lower confidence about their financial expertise, they do not necessarily simply want to delegate decision making to an investment manager and are less likely than men to use other people to help them reach their financial goals.” In the Prudential survey, women tended to identify themselves as collaborators when buying financial products, “with 44% saying they usually rely on some input from a professional advisor but make their own decisions.”

Women’s Economic Power Grows

Despite the gender gap in financial confidence and personal financial literacy, the economic future of women continues to hold promise. As Liz Davidson, CEO of Financial Finesse points out, “Women are seeking financial education and information at very high rates — typically about 2 to 1 compared to men — and are taking the education to heart.” According to the Barclays Wealth report, “Women across the globe account for up to 80 per cent of purchasing decisions and according to the World Bank, women will control a GDP that is bigger than that of India and China combined by 2014.”

That kind of economic power forces all of us — male and female — to pay attention to the strides women are making financially, and to explore how to help empower women. We can accomplish this without reinforcing negative stereotypes. And because women often contribute to the financial well-being of their family and community, we all benefit when we do.

What do you think? Are women and men different when it comes to money? Share your comments below.

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