Women ‘Know More Than They Think They Know’ About Finance — How Confidence Can Help Close the Gap

Women are less financially literate than men, finds a recent study from George Washington University — but they’re more knowledgeable than they believe.

The financial knowledge gap found in the study lines up with a “broader gender gap when it comes to confidently assessing [women’s] abilities,” says Dr Sian Beilock, a cognitive scientist and President of Barnard College.

That confidence gap plays a role in women’s financial plans for the future and makes them less likely to do certain things like invest in the stock market. “We need to make it harder for young women to avoid that which makes them anxious, including math and finance,” Beilock says.

“It’s hard to be one of these women because we’re trying to learn something relatively complex, while we have to defend ourselves and defend our positions in these industries,” said Vanessa Menchaca-Wachtmeister.

Here’s what you need to know about the financial literacy gap and some steps you can take to close it and achieve your financial goals.

Why It’s Important for Women to be Financially Literate

More than one-third of the gender gap in financial literacy can be attributed to confidence, instead of a true gap in knowledge, the study found. This confidence gap correlates to less stock market participation among women, which is a key means of building wealth.

The study concludes that “women know less than men, but they know more than they think they know.”

A similar study by the Proceedings of the National Academy of Sciences found cultural beliefs about gender roles negatively impacted women’s self-beliefs regarding pay, which impacts everything from salary negotiations to women’s ability to build wealth.

Women of colour, especially, face an even more disproportionate income gap because of generations of financial inequality. But that doesn’t mean women are inherently less capable of navigating finance and investing.

In fact, a 2017 Fidelity report found that despite earning higher average investment returns than men, just 9% of women believe they make better-investing decisions than men. “Women invest. We’re very good investors once we have the knowledge,” personal finance expert Bola Sokunbi told NextAdvisor last year. “We’re good at personal finances. We just need that information out there.”

Financial literacy for women can “give us our independence back,” said Menchaca-Wachtmesiter. In her own journey to pay down debt and gain financial independence, Menchaca-Wachtmesiter had to gain confidence early on. “The real game-changer was seeing through that ‘female feeling’ that I’m not worthy of money,” said Menchaca-Wachtmeister.

Stand Up For Yourself

Financial literacy and confidence matter for financial decision making, according to the study.

“I hope you guys are looking at us, we’re very different women, we come from different spaces. But if you look like us, if you come from where we come from, you can be up here doing what we’re doing. It doesn’t matter where you started,” said Menchaca-Wachtmeister.

How to Build Your Confidence and Your Wealth

Finding a role model can be a great place to start. Learn about what obstacles they overcame, and how you can implement their lessons into your own journey.

“Find people you can see yourself in,” Menchaca-Wachtmeister said. “I really value resources that are relatable.”

Building your confidence can directly lead to building more wealth.

“Particularly in the context of long-term financial decisions such as investment, retirement savings plans, private saving, and wealth accumulation, lower levels of confidence can be detrimental to women,” the report says. “And the effect may be exacerbated because women, on average, have a substantially longer life expectancy than men.”

This, coupled with the fact that women earn on average $900,000 less than men over the course of their careers, are huge barriers to building wealth — but not ones you have to live with.

Menchaca-Wachtmeister started “going hard with negotiations. In two years I raised my salary by 100%. I doubled my salary.”