Women's Financial Confidence Falters

by Hadley Malcolm

A year after women started to close the financial literacy gap with men, their financial knowledge and confidence are waning again.

Women are especially falling behind when it comes to managing money and investing, says a study released Thursday on the financial literacy gender gap by education firm Financial Finesse.

From 2011 to 2012, women became disproportionately less likely than men to pay their credit card balance in full each month, have an emergency savings fund and have a general understanding of stocks, bonds and mutual funds, the survey found. The gap between men and women widened by at least 6 percentage points in each of those cases.

The survey results are particularly worrisome given women's longer life expectancy, combined with the fact that they have less income on average over time from being out of the workforce longer to care for children and subsequently less Social Security to fall back on, says Financial Finesse CEO Liz Davidson.

"You put all these factors together, and we should actually be ahead of men in order to even reach parity in financial security overall," she says.

And particularly with investing — where women widened the gap the most between 2011 and 2012 — women tend to be risk-averse, which affects their financial confidence, says Pat Seaman, senior director of National Endowment for Financial Education.

"That plays into reluctance to make decisions in investing," she says, because investing has "proven to be volatile and a way of losing a lot of money. Women are very averse to losing money."

The survey data show women are considerably less likely to be confident their investments are "allocated appropriately between cash, bonds and stocks," with 29% of women saying they were confident vs. 45% of men.

But women aren't lagging on everything. Survey results show them on par with men when it comes to retirement planning. Almost equal numbers of men and women (more than 90% for each) said they participate in their companies' retirement plans or contribute to an IRA (26% of women and 27% of men).

But why are women backsliding overall after showing improvement in financial literacy in last year's survey?

"There's a little bit of complacency in the fact we're past the worse of our economic troubles," Davidson says. "Women as caregivers will do things for their children and for their families that may be costly and expensive and may be not even necessary and end up sacrificing the future, but in the moment it feels like the right thing to do."

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