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Lack of equal rights regarding financial decisions contributes to women’s lower level of financial literacy

Press Release of November 21, 2016

DIW Berlin examined the causes for the gender gap in financial literacy in several countries – Cultural factors play a key role in addition to income, education, and experience – Better financial literacy would mean more financial security for women in retirement

In most countries of the world, women know less about financial matters than men. Socio-demographic factors such as income, age, education, and experience with finances partially explain the gender gap in financial literacy. Cultural aspects, including the role of women in society, are also key factors. These are the findings of a study by the German Institute for Economic Research (DIW Berlin).

The study focused on Germany, the US, and Thailand. Men in Germany and the US outperform women – even women with higher educational levels and female heads of household – on financial literacy tests. In Thailand on the contrary, women know at least as much about financial matters and money as men. “In Thai culture, women often have the financial responsibility in the household. On this point, equality between men and women is greater there than in Germany and the US ,” said Antonia Grohmann, the author of the study.

Women must financially prepare better for retirement

Western countries expect an increasing number of people to rely on private funds for financial security in retirement. Women tend to have a higher life expectancy and take more breaks from their careers than men, so they are more dependent on private pensions. At the same time, financial products are becoming increasingly complex. Solid financial education is a deciding factor in making the right investment decisions. “National policy must try to improve financial literacy in general and that of women in particular,” said Grohmann.

The general level of education and numerical proficiency of girls and women must be boosted. Studies show that in most countries, boys outperform girls on mathematics tests. School lessons should focus more on financial literacy, and teachers must reinforce girls’ self-confidence in dealing with financial matters. “Also, and this is really crucial, financial literacy increases as women’s role in society changes,” concluded Grohmann. “The equality of the sexes – in the labor market as well – should be a general national policy goal.”