Gender Differences in Financial Literacy: Empowering Women. Annamaria Lusardi presentation at “The Partnering to Turn Financial Literacy into Action” FCAC & OECD conference in Toronto, on May 28, 2011.

1. Gender Differences in Financial Literacy:
Empowering Women
Presentation to the OECD-FCAC Conference
Toronto, May 26, 2011
Annamaria Lusardi
GW School of Business
Director, Financial Literacy
Center

2. Relevance
A new economic landscape
Individuals are increasingly in charge of their
financial well-being
Changes in the pension landscape
More individual accounts
Changes in the labor markets
Increased mobility
Changes in the financial markets
Increased complexity. Not many women work in
finance

3. How do women fare?
Women have specific needs
Women live longer than men, thus savings need to last a long
time
Because of shorter labor market tenures, women are less likely
to have pensions or to have experience with pensions.
Women are a vulnerable group
Death of a spouse often precipitates women into poverty (Willis
and Weir, 2000)

4. Question
Do women know the basic concepts needed to
make financial decisions?
Aim: Assess knowledge of basic concepts, the abc’s
of financial knowledge
The journey of 3 simple questions

5. Measuring Financial Literacy (I)
To test numeracy and understanding of interest
rates, we asked:
“Suppose you had $100 in a savings account and the interest
rate was 2% per year. After 5 years, how much do you think
you would have in the account if you left the money to grow?”
i) more than $102
ii) exactly $102
iii) less than $102
iv) don’t know (DK)
v) refuse to answer

6. Measuring Financial Literacy (II)
To test understanding of inflation, we asked:
“Imagine that the interest rate on your savings account was
1% per year and inflation was 2% per year. After 1 year, with
the money in this account, would you be able to buy…”
i) more than today
ii) exactly the same as today
iii) less than today
iv) DK
v) Refuse to answer

7. Measuring Financial Literacy (III)
Finally, to test understanding of risk
diversification, we asked:
“Do you think the following statement is true or false? Buying
a single company stock usually provides a safer return than a
stock mutual fund.”
i) true
ii) false
iii) DK
iv) Refuse to answer

8. Financial Literacy around the World (FLat
World)
These questions have been
added to national surveys in
 The Netherlands
 Germany
 Italy
 Sweden
 Russia
 New Zealand
 Japan

9. Financial Literacy and Gender: U.S. data (age:50+)
90.00%
80.00%
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
Compound Interest Inflation Stock risk
Male 74.70% 82.20% 59.30%
Female 61.90% 70.50% 47.50%

10. Financial Literacy and Gender: U.S. Data (age:23-28)
90%
82%
80% 77%
70%
60%
60% 53%
50% 48%
40%
40%
30%
20%
10%
0%
Interest Rate Inflation Risk Diversification
Male Female

11. “Do Not Know” Responses by Gender (age: 23-28)
50% 47%
45%
40%
35%
30% 29%
25%
20%
20%
15% 11%
10% 8%
5% 4%
0%
Interest Rate Inflation Risk Diversification
Male Female

12. Gender Differences in Self-Reported
Literacy (U.S. data )
On a scale of 1(very low) to 7 (very high), how would you assess your
overall financial knowledge?
35%
Male
30%
Female
25%
20%
15%
10%
5%
0%
1 = Very low 2 3 4 5 6 7 = Very High Do not know Prefer not to
answer

13. Similar Findings in Other Countries
In all countries, women have a tendency to state that they “do
not know” the answer
 Women are aware of their lack of knowledge
No gender differences in East Germany and Russia
 Financial literacy is equally low between women and men
 With developed financial markets, women are left behind
No gender differences among indigenous population in New
Zealand
 Relationship with norms and culture

14. Linking Financial Literacy to Financial Behavior
Debt and debt management
Investments
Planning and wealth accumulation

15. Financial Literacy in High School
The small proportion of high school students (7%) in the
United States who are financially knowledgeable are
 Male
 From college educated families
Lack of financial knowledge starts at a young age
OECD Programme for International Student Assessment
(PISA)
 Measure financial literacy among 15-year-old students in
19 countries in 2012

16. Our Financial Literacy Center (FLC)
 Build on many years of research on financial literacy
 Bring together three institutions with expertise in
pensions, saving, data collection, and program
evaluation
 Bring together multi-disciplinary teams of
researchers
 We have several programs targeted to women

17. Video Game: Celebrity Calamity
Project with Doorways
to Dreams (founder is
Peter Tufano from
Harvard Business
School)

18. Initiatives for College Students
Designing financial literacy modules
Building financial literacy content in college
courses

19. Evaluate a Financial Bootcamp for Women

21. Concluding Comments
Financial literacy is a necessary skill, like
reading and writing
 Need to equip women with tools to make decisions
- Women around the world are increasingly in charge of their
financial well-being
 Cost of financial illiteracy at both the individual and the
macro level
- The importance of financial education