Financial Education and Confidence: The Gender Gap in the Financial Market
Research
26.11.2024
ZEW Study Reveals: Women Are Less Confident in Financial Decisions than Men
Globally, women score lower than men in terms of financial education. However, part of the gender gap in financial literacy can be attributed to a lack of self-confidence rather than just a lack of knowledge. This is the conclusion of a new study by ZEW Mannheim, which examines the relationship between financial literacy, self-confidence and stock market participation. The study is based on data from the Dutch Household Survey, which has been asking more than 1,500 Dutch households about their finances every year since 1993, and introduces an innovative model for measuring “true” financial literacy.
“Our findings show that women’s lack of confidence in their financial knowledge significantly contributes to the gender gap in financial literacy,” explains Tabea Bucher-Koenen, head of ZEW’s “Pensions and Sustainable Financial Markets” Unit. “Around 30 per cent of the gender gap in financial literacy can be attributed to a lack of self-confidence. Both knowledge and confidence are crucial for stock market participation.”
Confidence and financial knowledge
The analysis reveals that women are more likely to respond “don’t know” to financial questions, even though they often do know the correct answer but feel uncertain in their responses. The researchers conducted two survey modules to examine how self-confidence influences responses. In the first module, respondents had the option to select “don’t know”. In the second module, this option was removed, requiring participants to choose an answer. The results show that many women were capable of selecting the right answers when forced to make a choice, with a high likelihood of choosing correctly.
Differences in stock market participation
Furthermore, the study investigates how financial literacy and self-confidence affect financial decisions, particularly stock market participation. Women who possess both financial knowledge and self-confidence are more likely to participate in the stock market and make provisions for retirement. This finding underscores the importance of the combination of both factors in making informed financial decisions.
