Women vs Men: A Look At Financial Decisions

man versus woman

By now, we are well aware that the perceived differences in the abilities of men and women are more of an environmental factor than based in biology. Still, years of societal pressure are influencing women across the globe and enforcing negative stereotypes. Like the one that men are more competent when it comes to financial decisions and investing money. Here’s what science has to say about that, and how women can and are already excelling in financial matters.

High Risks, High Rewards – By Nature?

Spoiler: in the end, the argument boils down to risk taking behavior. Women are, stereotypically, seen as less impulsive, less decisive, and less willing to take risks. Men on the other hand are adventurous, competitive, and overconfident. In theory, this makes men more likely to take advantage of high risk high reward opportunities, while women would rather not risk money on uncertain events.

Environmental Pressures

While there is some truth to these basic categories, they are mostly a result of environmental pressures. Women are consequently taught to be more careful, detail oriented and timid. Additionally, not so long ago – and we are still feeling the effects of it – women weren’t allowed to control their own finances, leaving them dependent on men and naturally more afraid of the catastrophic consequences of financial dependencies, even today.

If you’d tell a man about bet365 Casino, one of the countless online casinos popping up these days, chances are he’d be more willing to give the gambling service a chance, while a woman would pick it apart. How safe is it really, how much can you gain, how likely will you lose…? These kinds of worries come more easily to women.

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Confidence vs Overconfidence

A study from 2021 has found out, however, that women aren’t inherently worse at financial decisions than men. In the assessment, women have consequently expected themselves to be worse with financial matters than the results of the tests proved. The problem is less one of financial illiteracy, and more of a lack of the typically male overconfidence.

We know this dilemma from other areas of life as well. While men typically see bad things happening as coincidence and good things as a result of their efforts, it’s typically the opposite for women. Similarly, men tend to apply to jobs above their pay grade more often and are more likely to ask for a raise.

There’s this phrase going around, a play on the famous “What would Jesus do?”: If you ever doubt that you deserve something, ask yourself “What would a mediocre white man do?”. Chances are, he’d never doubt he’d deserve it in the first place. It’s not his fault, even, it’s just a sign of how women (and POC) have systematically been treated differently than (white) men for centuries, allowing them to built confidence much more easily.

Breaking the Stereotypes

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While we are ever so slowly working on breaking these patterns, there are some benefits women can gain from the characteristics that have been instilled in the female population for so long. Turns out, all these claims that women make worse financial decisions are just straight up wrong.

Men are more likely to take risks, especially in stressful situations, which leaves them to benefit from many opportunities women would stay away from. But does that mean they make smarter decisions? Caution isn’t necessarily a hindrance when it comes to financial matters. Studies show that female investors are more successful than their male competitors. In this example, over a three-year period a group of male investors has a return of 0.14 % above the performance of the Financial Times Stock Exchange Top 100, whereas the female group reached 1.95 %.

Similarly, polls show women save more than men (85 % vs 62 %), plan to pay down debts more often (72 % vs 65 %) and reduce spending in the recession (72 % vs 62 %). Showing that women are just as and even more capable than men at managing money and making prudent financial decisions. They are simply less represented, or maybe just perceived as inactive, in impulsive and risky investment environments.

Not Quite as Risk-Averse as Thought

While many studies point out that men are typically more reckless, it is also true that women are not as risk averse as they might seem. However, there are many factors that leave us with this impression. Most of them are simple psychological cues. When we see a strong, tall and attractive person, studies say we automatically expect them to be more risk-tolerant. By implication, that leaves women who are genetically more inclined to be smaller to automatically be seen as more risk averse.

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Conclusion – The Potential for Greatness

The ability to make acute analyses and consider large amounts of information make for a great basis for successful investors. Since women have been taught to be careful and protect themselves rather than be aggressive and open to risk-taking, they have earned a unique skill set that does not necessarily need to hold them back when it comes to financial matters.

These abilities can be made use of when it comes to economic factors. Investing is very often a matter of compiling and comparing information and using it to anticipate market movements. By waiting, observing, and looking at the details before making impulsive decisions, women have the potential to make uniquely smart investment decisions.

At the same time, women are not nearly as risk averse as society would make them out to be. Investing in stocks or playing in online casinos are just as much of a playing ground for females as they are for males. But women lack the same risk-taking role models males have been presented with for a long time.

Their caution and detail-oriented solutions would make a great addition to the typically male-coded overconfidence. A combination could lead to smart risk-taking decisions in financial matters. It’s just a matter of pushing women to face their fear and giving them the same support and opportunities their male counterparts had for decades.

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