Debunking the Myths: Lies About Women and Money

Debunking the Myths: Lies About Women and Money

June 03, 2024

I'm not sure who began the "women are not good with money" narrative, but what I do know is that story is simply not true. From being labeled as frivolous spenders to being deemed risk-averse and mathematically challenged, these stereotypes not only undermine the financial capabilities of women, but also perpetuate harmful biases. I'm here to debunk these myths one by one.

#1 Women are frivolous spenders

It's no secret that women love shopping. The problem isn't that we enjoy this activity, but rather that we as women are inherently frivolous with our spending and have little regard for cost. This suggests that women are more interested in shopping sprees and luxury items than in saving or investing for the future. However, research paints a different picture.

In 2019, a survey by CNBC and Acorns found that men are just as likely as women to make impulse purchases, though men report being more likely to spend more when they do. And a 2021 report finds that men and women tend to have similar overall shopping behaviors, with men being slightly more willing to spend on non-essential goods than women – likely as a result of having higher earnings on average.

In other words, despite popular perceptions of women being more likely to spend excessively, real differences in how men and women spend are minimal.

#2 Women are risk-averse

Another common misconception is that women are risk-averse when it comes to investing. This stereotype suggests that women are hesitant to take financial risks and prefer to play it safe with their money. While it is true that women may approach investment decisions differently than men, attributing this difference to a lack of risk appetite oversimplifies the issue

It is a fact that men tend to take more risks in their investments compared to women. On average, men allocate more of their funds to stocks and engage in more frequent trading. However, these statistics are often framed in a way that implies men are taking an appropriate amount of risk while women's cautious approach limits their potential earnings. Men's investment behavior is often positioned as the standard against which women's actions are judged.

Contrary to this narrative, research indicates that over time, women actually achieve slightly higher returns on their investments, partly because of—not despite—their attitude towards risk. Barbara Stewart, an expert in women and finance, succinctly expresses this concept by stating, "Women are not risk averse; they are risk aware."

Women typically adopt a long-term investment strategy, holding onto their assets and trading less frequently. Additionally, they tend to respond differently to market volatility. For instance, during the financial crisis of 2008, men were more prone to panic and sell off their stocks, while women were more inclined to retain their investments, ultimately positioning themselves better to capitalize on the market's eventual recovery.

Unfortunately, the pervasive belief that women are risk-averse can perpetuate itself, influencing financial professionals to steer women towards overly conservative investment portfolios.

It's time for women to recognize themselves as "calculated risk-takers" rather than simply risk-averse. 

#3 Women are not good at math or money

It's astonishing to consider that less than half a century ago, women in the United States were finally granted legal recognition for full financial autonomy. Prior to the passage of the Equal Credit Opportunity Act in 1974, women faced significant barriers - they were unable to obtain credit cards in their own names, and banks often demanded single, widowed, or divorced women to bring a male cosigner, regardless of their individual income, to secure loans.

While progress has been made since the 1970s, the lingering stereotype that women are inherently "bad with money" persists in our culture. Media depictions continue to reinforce this notion, portraying women as extravagant spenders, perpetuating the idea that their financial knowledge revolves solely around consumption. For many women, it's challenging not to internalize these societal biases to some extent. Often, they express feelings of inadequacy, believing they lack sufficient knowledge or are not taking enough action to feel confident in investing, borrowing, or making significant financial decisions.

However, such self-doubts are contradicted by a wealth of research indicating that, in many instances, women are just as adept at managing finances as men—and sometimes even outperform them.

For instance, women exhibit a higher likelihood of repaying loans on time. Despite being less inclined to invest and feeling less confident when they do, studies reveal that women often achieve superior investment returns. According to a report based on data from over 5 million individual customer accounts by investment bank Fidelity, women outperformed men by 0.4 percent.

#4 Women are not interested in talking about money/investing

Finally, there is a misconception that women are not interested in discussing money or investing. This misconception traces back to a time when household finances were predominantly managed by husbands, and the financial sector offered limited opportunities for women professionals.

Even today, men hold the primary financial decision-making roles in about two-thirds of affluent baby-boomer households and significantly outnumber women in finance-related careers. However, we stand at the brink of a monumental shift due to a generational wealth transfer.

Projections suggest that by 2030, women will control 66% of investable wealth in the US and become the primary financial decision-makers across all income brackets as baby boomers transfer over $30 trillion to younger generations.

There's a growing advocacy among women for their financial priorities, demanding advisors to understand and respect their unique perspectives. For instance, women often prioritize financial planning for real-life goals over market outperformance. They show greater concern for philanthropy and the social and environmental impacts of financial decisions compared to men. Additionally, considering their longer life expectancy and lower average earnings, women need tailored portfolio strategies for retirement planning.

In summary, the myths and stereotypes surrounding women and money are not only false but also harmful. By perpetuating these misconceptions, we undermine the financial capabilities and aspirations of women, limiting their opportunities for economic empowerment and success. It's time to debunk these lies and recognize the diverse talents and abilities of women in the realm of finance. Empowering women to take control of their finances and pursue their financial goals is not only the right thing to do but also essential for building a more inclusive and equitable society.

Part of this transformation involves fostering open conversations. Unfortunately, fewer than 15% of women regularly discuss finances with friends and family, often due to feelings of shame or the desire for privacy. Yet, regular financial discussions correlate with increased confidence and proactive financial goal-setting among women. 

As women gain control over the majority of the nation's wealth, it's imperative for them to be financially empowered, and for advisors to adapt the industry to prioritize women's needs and goals. 

I encourage all women to engage in dialogue with a financial advisor to ensure that your investment strategy aligns with your specific goals and circumstances, rather than being dictated solely by gender stereotypes. Please feel free to contact me if you'd like to discuss your financial situation in a friendly, non-judgmental environment.