With the world recognizing International Women’s Day last week, Canadian banks trotted out a slew of research on gender differences with regards to money matters.
Experts cited women’s tendencies to trade more conservatively and their abilities to manage debts better than men.
Could women naturally be better with money than men?
“Women typically have different approaches to investing than men,” said Viki Lazaris, president and CEO of BMO InvestorLine. “Female investors tend to be more conservative and risk averse. They often seek out advice, prefer a more collaborative relationship and are more open to assistance.”
According to a BMO study, 16% of Canadian women consider themselves aggressive investors, compared to 30% of men; just 13% of women say they are impulsive investors, versus 21% of men.
But does this approach make them better investors? Some research says, “Yes.”
“We had a theory that overconfidence leads people to trade too much and hurts their performance,” said Brad Barber, a professor of finance at the University of California and co-author of a study entitled Boys Will Be Boys: Gender, Overconfidence and Common Stock Investment.
The paper noted psychological research showing that men were more prone to overconfidence than women, particularly in male-dominated realms such as finance. Men were more likely to expect their portfolios to outperform the market.
Using data for more than 35,000 households from a discount brokerage, researchers analyzed stock investments from 1991 to 1997. Men traded 45% more than women. Trading reduced men’s net returns by 2.65% a year as opposed to a 1.7% reduction for women.
“The real question is whether those represent innate differences in the sexes or this is just a cultural artifact,” Prof. Barber said. “It’s plausible that women are raised in an environment where the world seems like a scarier place than it does to men. At least historically, the opportunities open to women were probably less. The threat of physical violence would be higher.”
Women’s predisposition for risk aversion as compared to men might explain why they are less likely to take on debt and why more men than women report being compulsive gamblers.
Men are more likely to carry large amounts of debt, with 30% reporting more than $100,000 of debt compared to 22% of women, said a BMO poll. Men were also more optimistic about their ability to pay the debt down (20% said they would do so in the next year compared to 14% of women).
It’s plausible that women are raised in an environment where the world seems like a scarier place than it does to men
Still, some will point to the stereotype of the female shopaholic, the clotheshorse who will spend hours flipping through every rack at Winners, like they’re methodically clacking an abacus. But a 2006 study in the American Journal of Psychiatry established that while 6% of women are compulsive buyers, men are close behind at 5.5%.
At least 80% of women are either the primary decision makers in the household or share equal decision-making responsibilities, with 40% handling the day-to-day budgeting and spending, said Betsey Chung, vice-president and head of marketing and client strategy at BMO Private Client Group.
Despite the gains made by women in the world of finance — 31% of wives were out-earning their partners in 2009, as compared to 12% in 1976 — they remain less confident about money issues.
Men are still more likely to handle investments and long-term planning, says a TD poll. Women are less prepared for retirement, even though they live longer (78.8 years for men and 83.3 years for women in 2009) and earn less than men (in 2008, women earned, on average, 83 cents to every dollar earned by men).
“Men seem to be able to take a longer term perspective on money — possibly because they aren’t worried about the household when a female partner is looking after the details of meals, children’s schedules, etc.,” said Lee Anne Davies, president of Agenomics.ca, which offers information on aging, health and wealth.
“I’m hearing from more and more women that they want to know how to do this. For women, it’s about taking care of their families and those important to them and this needs to include taking care of financial matters. This means increasing one’s understanding, involvement with and ongoing financial planning. It’s never too late to start.”