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The World Of Women's Finance - Is It Different From Men's?

For most of us, our finances often seem to occupy a rather bland bubble in our lives. 

Topics like taxes or investment portfolios conjure up totally objective images and rarely seem to touch on anything truly personal. 

But finances are anything but objective.

The way people learn about, view, and experience their financial reality can differ dramatically based on their age, occupation, social status, and, perhaps surprisingly, their gender. In fact, a person’s gender is often one of the most defining characteristics of their financial life.

Many readers might be shaking their heads at this statement. After all, we don’t think about our gender as having anything to do with things like accounting methods or beliefs about money’s place in the world. It does impact these things and many other areas of our financial lives, however, and there’s plenty of research and data to back that assertion up.

Here are four examples of how the world of women’s finance is unique to men’s - and why these differences matter when we talk about money.

Difference 1: Women Are Perceived As More Risk-Averse (But Are They?)

There’s a common conception among people of all backgrounds that “women don’t like risk” when it comes to investing.

In some cases, this assumption seems to be borne out by the available research...on a surface level. Look a little deeper and you’re likely to find a bit more nuance. 

When studies control for income and demographics, they tend to find that women invest with the same level of risk-taking seen in their male peers. Many experts have pointed out that women on average tend to earn less money than men for a variety of reasons, such as taking more “breaks” to have and raise kids or being pushed into lower-paying jobs by societal expectations and cultural pressures.

That being said, the big picture can reveal a few basic trends outside of basic “risk vs. stability” patterns. Women do tend to invest more in relatively stable 401K accounts as compared to the men in their same income group, for example. 

Female investors also seem to emphasize the use of expert opinions, research, and data in their investment decisions and rely less on bold moves than male investors do.

In a recent Unblu blog post, financial expert and Marketing VP Javier Puga notes that “what initially appears to be low-risk tolerance may simply be a preference for fact-based investment. Women want all the information before making an investment, rather than relying on gut instinct.” 

He adds that “once [women] have all this information, their investments are actually very similar to those of men—and they’re done with a greater degree of confidence, having reduced perceived risk by means of research.”

Generally speaking, research has shown that women do invest differently than men in certain ways, but mostly they simply take a different approach to investing. This has less to do with risk and more to do with mitigating that risk before they go all-in. 

Difference 2: How Women Spend vs. How They Save

Another pervasive assumption about women is that they do not save as much money as men do. There are plenty of tongue-in-cheek jokes about why this is, with some being more well-meaning than sexist.

The fact of the matter is that data does not bear out this assumption in the first place. Women on average save more than men when a reliable metric such as income percentage is used (as opposed to simple arithmetic, which misses the point entirely).

In a recent ThriveGlobal piece, U.S. Money Reserve Controller Sherry Hao observes that “stereotypes [...] tell us that women and men save differently. As the saying goes, women like to spend, while men save. Yet today’s research disproves that idea and shows that, in fact, women actually tend to save more than men do as a percentage of their earnings.”

Based on this, we can conclude that yes, there is a difference between men’s and women’s saving habits - but it’s the opposite of what is usually assumed! Ultimately it’s more a matter of strategies than fundamental habits, as men may view riskier assets such as stocks as a form of “saving” while women do not.

Perhaps because of their longer lifespans and increased likelihood of becoming a caretaker, women as a whole trend toward stable savings and the paying off of debts as a financial strategy when compared to men. 

In a similar vein, women often spend in the name of family or communal obligations as well, and as a whole women tend to spend less on “big” purchases such as automobiles and electronics than men in their same income bracket.

Difference 3: Financial Education - a Lesson In Expectations

Financial literacy is a popular topic these days, and when it comes to the way we educate girls and boys about money, it quickly becomes a complicated one.

Overall, financial literacy is a challenge faced across gender lines. We can blame the public school system, parents, the media, or anyone else for the lack of financial education in America, but the end result is the same - Americans don’t know enough about their finances or how to manage them.

That being said, women come out worse than men in this regard. Financial literacy is emphasized far less for girls and young women than it is for their male peers, which results in a shakier foundation for them as they grow older. Despite rising equality in income, education, and many other areas of life, financial literacy still isn’t seen as a major priority when it comes to the messages we send to girls and women.

This discrepancy can have dire consequences for women later in life. Michelle P. Cooper, the co-founder and director of XML-W, a subsidiary of the well-known financial firm XML, has made it her mission to educate women about the risk of letting financial literacy fall too far down on their list of priorities.

In a 2019 JWI interview, Ms. Cooper expressed her view that “the most common mistake that I see people making, especially women, is not prioritizing their financial health.” 

She goes on to explain, “we know we need to do it but it falls to the bottom of our list. This can take many forms: It might be leaving too much money in cash, not attending financial review meetings, or ignoring the financial topic altogether.”

When a big event happens, such as an audit, unexpected healthcare costs, or, in Ms. Cooper’s own case, the sudden death of a spouse, many women find themselves wholly unprepared for the financial chaos that follows. Financial literacy is the key to preventing this stress from upending day-to-day life.

According to a Stanford study titled “Spotlight on Women's Financial Literacy,” female representatives across all generations are less confident in answering financial questions than their male counterparts are. Women tend to rely more on others when it comes to their personal finances, too, and may shy away from big financial decisions out of a lack of confidence in their knowledge and skill set in this area.

The conclusion? Men are either getting a stronger financial education early on, or they are simply more confident about using that education even when it matches that of female peers. Either way, the difference can have plenty of negative effects for women.

Difference 4: Women as Business Owners

Despite continual underrepresentation in the collective C suite, women have made impressive gains in the world of business ownership.

As of this writing, women own 40% of U.S. businesses, generate $1.8 trillion in revenue, and only seek financing 25% of the time when founding their businesses [data source]. These data points are a direct refutation of the stereotypes historically associated with females in the entrepreneurial space - and they indicate important changes and unique features in the ways women approach business as a whole.

For most of our history, men have been the owners of the “public,” career-focused sphere, and nowhere has this been more true than in the realm of entrepreneurship. In a recent article, the female leadership organization Female Founder Space observed, 

“Men, as the symbol of masculinity along with certain male-specific attributes such as confidence, risk-taking and confidence, are assumed to be representative of the ideal entrepreneur.”

This perception is clearly changing. Does that mean that women entrepreneurs are approaching business the exact same way as their male peers? Research suggests that the answer to this is a resounding no. 

In an updated 2017 report, the Organization for Economic Cooperation and Development (OECD) noted that women entrepreneurs tend to have “different motivations and intentions in entrepreneurship than men.” They place a higher value on work-life balance and are more focused on balancing multiple career and social identities rather than simply maximizing their business-related roles.

Female business owners view their finances differently, too, and appear to emphasize longevity and sustainability more than male counterparts (who may be more interested in quick-growth strategies and immediate results). This is reflected in the tendency of women entrepreneurs to avoid debt-generating startup costs and rely more on their own cash investment, even at the (literal) cost of speed and short-term growth.

All in all, women are becoming a huge financial force in the American economy, especially in the realm of business ownership. The ways they are gaining and applying that force is unique, and these differences are likely to have a significant impact on the views we have toward entrepreneurship and business finance in general.

As Women’s History Month draws to a close, we have the opportunity to reflect upon the unique strengths, challenges, and strategies that define women’s relationships to their finances. 

The differences and observations explored here are just the beginning of deeper trends that will impact the way we as a culture handle our money and pursue financial health. As women continue to become major economic players and take up their fair share of the world’s finances, their experiences and viewpoints will only become more and more vital.

Those of us who work in and occupy the finance industry have a vested interest in adapting to and understanding women’s financial needs, as well as their unique perspectives. 

In a field which has been so traditionally male-dominated, our job isn’t to make judgments or fall back on old beliefs about wealth and its management - instead, professionals will need to open themselves up to the voices of women in finance and learn from what they have to say.

This piece reflects the views, opinions, and beliefs of the author and does not necessarily represent the opinions of Foumberg, Juneja, Rocher, & Co. It is not intended to malign any religion, ethnic group, club, organization, company, individual or anyone or anything.

Tarun Juneja, Firm Principal, Foumberg, Juneja, Rocher & Co. 

Emily Montague | 03/29/2021