the Gender Financial Literacy Gap and The Role of Math Confidence

Despite advances in gender equality and female led families in the United States over the past decades, men are still considered to be more financially savvy. Women consistently score lower than men on financial literacy assessments. The gender gap in financial understanding may lead to gaps in financial and economic outcomes. What is not clear is why does the gender gap in financial literacy exist? One possibility that has been proposed is that math ability is a predictor of financial understanding and that there might be gender differences in math ability.

In our recent paper, coauthored with Whitney Buser and Darshak Patel, we survey college students and test their financial understanding and math ability to see if there is any relationship between the two. Additionally, we ask students to rate their confidence in their math abilities and construct a math confidence score.

We find that students with higher levels of confidence in their mathematical ability also have higher rates of financial literacy compared to students with lower levels of confidence in math ability. We also find that there is a relationship between true math ability and financial literacy. Students that are above average in their math ability score higher on measures of financial literacy. We find that both confidence and true math ability are related to students’ knowledge of personal finance concepts. 

The most important finding is that the relationship between confidence on financial literacy is sensitive to gender. Men’s financial literacy outcomes are less likely to be related to their perception of their math ability. On the other hand, women’s true math ability is not related to their financial literacy score, but their confidence in math ability is closely related to their financial literacy. Women that are more confident in their math abilities, regardless of their true math score, have higher financial literacy scores.

Efforts to increase financial literacy that do not address social and educational structures will not be successful at narrowing the gender gap in financial literacy. We find that the financial literacy gap exists earlier in life before household specialization and household division of labor can be considered as possible determinants of the gender financial literacy gap.

Read The Paper

Al-Bahrani, A. Al-Bahrani, A., Buser, W., Patel, D. (2020). Early Causes of Financial Disquiet and the Gender Gap in Financial Literacy: Evidence from College Students in the Southeastern United States Journal of Family and Economic Issues. 1-14.

Abstract: Financial literacy, a cornerstone of family economic well-being, is surprisingly low in the United States. The literature has established that financial literacy is lower among women than among men. As sound financial decision-making among both male and female household heads is of paramount importance to well-being, we look to identify the underlying causes that may initiate and perpetuate this differential. We found that a gender-based gap in understanding develops by early college age, before individuals have had the opportunity to develop financial skills through experience or specialization in household roles. The literature indicates that women tend to underestimate their abilities relative to men, particularly in areas of math and financial decision-making. Math ability, financial confidence, and financial and math education have been found to enhance financial literacy, and so we focus on math self-efficacy as an early indicator of financial assurance and literacy. Using an ordered probit model and data from a sample of 529 college students across three institutions in the southeastern United States, we extend the current literature to find that for men, objective math ability drives financial literacy. For women, on the other hand self-efficacy—and not objective ability—is predictive of financial literacy. Understanding the underlying causes of the gender-based financial literacy gap can inform the creation of better education, family, and cultural intervention methods by which to close this gap in financial literacy, decisions, and outcomes.