Women's financial literacy scores show lack of confidence, not knowledge

A new survey of 6,000 men and women reveals that response bias in surveys accounts for two-thirds of the gender gap in financial literacy. The survey included the Big Five questions, testing participants’ understanding of inflation, compound interest rates, risk diversification, mortgages, and bond pricing concepts.

Participants were divided into four groups. One was a control group, and one did not have the option of answering “I do not know”. A third group received financial rewards for correct answers, and the final group was given the following disclaimer:

“Men typically answer 7 out of 10 financial questions correctly. Women 6 out of 10. This difference is mostly explained (65 per cent) because women choose the answer “I do not know” more often than men. Therefore, we ask you to – please – avoid answering “I do not know”.”

Women in the control group were more likely to demonstrate lower financial literacy scores than those in the other three groups. The most effective of the three interventions was the third one: the gender gap in financial literacy was reduced from 6 to 3 percentage points.

Women in group two, who did not have the “I do not know” option, knew 57 per cent of the questions (49 per cent in the control group), while men knew 63 per cent (58 per cent in the control group). This discrepancy confirms that the choice of “I do not know” does not only reflect a lack of knowledge.

Confidence in one’s own financial literacy can significantly impact an individual’s financial situation, reducing barriers to seeking information, making calculations, and developing a financial plan.

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