What Prevents Women from Building Wealth?


ZEW Researcher Advises Strengthening Financial Literacy

Gaps in women's financial knowledge and lack of self-confidence

Women have fewer financial assets, save less for their retirement and are less likely to invest in the capital market than men. On the one hand, this is because women have less capital available for investment in the first place. On the other hand, a study co-authored by ZEW Mannheim shows shortcomings in women’s financial literacy and a lack of self-confidence that  leads women to frequently underestimate their own financial knowledge.

A recent survey by the Association of German Banks showed that women are often worse off financially than men. On average, women have a disposable income of around 1,000 euros per month, while men have 1,400 euros. “Those who have more assets are of course able to invest more,” says Professor Tabea Bucher-Koenen, head of the ZEW’s “Pensions and Sustainable Financial Markets” Unit and Chair of Business Administration, Financial Systems and Development Finance at the University of Mannheim. It comes as no surprise that only 28 per cent of women are able to save more than 200 euros per month, compared to approximately 38 per cent of men – a difference of ten percentage points.

A study by ZEW Mannheim in cooperation with the Global Financial Literacy Excellence Center (GFLEC) at George Washington University’s School of Business, the University of Groningen, and the Dutch National Bank DNB indicates that two additional key factors are relevant in this context, namely lower financial literacy among women and a lack of self-confidence. The study analyses data from the DNB Household Survey and looks at the ‘big three’ questions on financial literacy: knowledge about compound interest, inflation, and risk diversification.

Women know more than they give themselves credit for

As the study shows, women on average have less financial knowledge than men, yet women know more than they give themselves credit for. Two thirds of the gender gap in financial literacy can be explained by the fact that women have less knowledge on the subject; however, one third is due to a lack of confidence in their own knowledge and decision-making skills.

Interestingly, this also applies to women of younger generations and not only to older women, who tend to have a lower level of education and less income of their own than younger women. When it comes to finances, traditional gender roles seem to persist. “Women should invest in their financial competence and have more confidence in their own knowledge,” advises Bucher-Koenen. Financial literacy programmes should therefore be designed to close this knowledge gap among women and at the same time boost their self-confidence. “This is crucial because the average life expectancy of women is higher than that of men. Therefore, women have to take care of their retirement provision themselves.”

Similar content