Are men or women better with money?

I know broad statements about gender are risky. As the way someone approaches their finances is an Are women or men better with moneyindividual as can be. But there is no denying that there are some trends and studies that show a difference in the way men and women view investing.

You only need to take a look at some of the bloggers in the personal finance space to see some of these trends emerging. There is a lot of blogs by women that are focused on budgeting, saving and being thrifty.

Whilst most of the bigger names in the financial independence and early retirement blogosphere are males (think J. Money, Mr Money Moustache, Grant at Millennial Money and Mad Fientist.

So the question is, are women or men better with money? And is there something we might be able to learn from each other.

Men earn more

I mentioned this in my know your worth post, that a gender divide still remains and is not going to go away anytime soon.  As a result, men tend to have more money in investments than their female counterparts.

Women are likely to have a higher savings rate percentage

Whilst the difference is only minor. Studies have shown that women tend to save on average 7% of their income. Compared to men’s 6.8%.

Given women also tend to have a lower income than men it’s probably not a bad thing that we save a higher percentage. As the actual dollar amount is likely to be a higher figure for men.

So whilst this point is a win for the girls, both sexes don’t seem to be saving enough on average to fully fund retirement. At least a 10% savings rate is pretty commonly mentioned. But some personal finance bloggers seeking financial independence have savings rates well over 50% of their income.

Women take fewer risks

Studies have shown that women don’t invest to the same degree as men. About 68% of women have savings parked in cash earning a lower percentage than males who take on more risk. Women fear losing principal and worry about not having access to cash when they need it

Men are more confident investors

As a result of being more confident, men tend to trade more. Which can be both an advantage and a disadvantage.

Studies found over a 5-year period men earn 0.4% higher returns than women, but this time frame really isn’t enough to know if that is the full story.

As women trade less due to being more goal-orientated, women are less likely to trade at the wrong time and try and beat the market.

Women think they know less than the average investor

When asked if they know less than the average investor 55% of women agreed. Compared to just 27% of men when asked the same thing.

This is actually not such a bad thing. The advantage of this is that women are more likely to seek professional advice. They ask questions about understanding the purpose of a strategy proposed to them and make sure the answer aligns with reaching their goals.

Men take on more personal debt

On average men take on more debt than women. In a recent poll, 33% of men had more than $100,000 in debt compared to only 22% of women.

This might also go back to the income difference, as men may be approved for higher loans due to their higher income.

Women care more about paying off their home loan

A study by Westpac showed that 90% of women listed owning their home as their top lifetime goal. Compared to 80% of men. Women also tend to understand the features of home loans more than their male counterparts.

As I mentioned from the outset, these statements are all generalisations and averages. Of course, there are going to be different ways people manage money. For me, the biggest factor to determine your financial future is to get educated. Know your risk profile and look to build your nest egg based on what allows you to sleep at night.

Have you noticed a difference in the way men and women in your life manage their money?

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3 Comments

  1. I think you outline the differences pretty well.
    I would say that ideally, it’s better to have both partners giving their input to create a nice balance.
    The female being perhaps more risk averse should temper the males overconfidence and risk taking nature, for example.

  2. I’m trying to overcome my lack of negotiation + risk taking. I think I’m risk averse but have read enough about investing at this point to be educated. I definitely saw this dynamic in my parents marriage. My mom saved more and did most of the money management in our household, but she was a terrified investor! She told me a few years ago that her retirement portfolio is not doing nearly as well as my dads.

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