Gender Differences in Personal Financial Literacy Among College Students

Abstract Surveying financial literacy among college students, we find that women generally have less knowledge about personal finance topics. Gender differences remain statistically significant after controlling for other factors such as participants' majors, class rank, work experience, and age. We do find, however, that education and experience can have a significant impact on the financial literacy of both men and women. We observe that women generally have less enthusiasm for, lower confidence in, and less willingness to learn about personal finance topics than men do. College women (men) rate English and humanity (Mathematics and science) courses more important. We argue that the study paves the way for future research and has important policy implications given the women tend to outlive men. © 2002 Academy of Financial Services. All rights reserved. JEL classification: J16 Keywords: Personal financial literacy; Gender differences 1. Introduction Prior studies have found that Americans have little knowledge about personal finance and consequently have managed their finances poorly. One of the acute problems found in these studies is that women know less about financial management than men (Harris/Scholastic Research, 1993; Volpe et al.,1996; Goldsmith & Goldsmith, 1997a, b; Chen & Volpe, 1998). In comparison to men, women share a larger burden of raising families, start to work later and earn less during their careers, live longer, have inadequate pension or survivors' benefits, and face more challenges in financial management (Alcon, 1999; Anthes & Most, 2000; Timmermann, 2000). Recent studies have also found that women are less risk seeking than men (Bajtelsmit & Bernasek, 1996; Powell and Ansic, 1997; Bajtelsmit et al.,1999). Risk averse behavior of women in their retirement planning will likely result in significantly lower pension wealth than men. This issue of women and their money management has been widely discussed in the media (Martinez, 1994; Genasci, 1995; Lewin, 1995; Pasher 1996). Recently, Hira and Mugenda (2000) reported that women are more likely to be dissatisfied with their finances than men. A woman's concerns about her personal finances are more likely to affect her work performance. While previous studies suggest that in general women know less about personal finance than men, they have provided limited evidence of the areas of personal finance where women's knowledge is inadequate (Volpe et al., 1996; Chen & Volpe, 1998). Danes and Hira (1987) found that males know more about insurance and personal loans, but know less about overall financial management than females. Their findings suggest that men may know more in certain areas of personal finance than women and less in other areas. Furthermore, there is little research on how general education, income, and other factors will affect people's financial literacy (Alcon, 1999). Finally, even if there are real gender differences in financial literacy, we need to analyze why women are less financially literate than men. These important issues have not been thoroughly investigated and warrant further research. One of the weaknesses of the prior studies is that most of them use a convenience sample from a single university (Danes & Hira, 1987; Volpe et al., 1996; Goldsmith & Goldsmith, 1997a, b). Using a large sample from multiple colleges and universities in various states in the U.S., this study seeks to answer the following questions: Are there differences in financial literacy between men and women? In what areas are the differences, if they exist, most evident? What are the factors that affect men and women's financial literacy? Why are there gender differences in knowledge of personal finance? Since one's knowledge is closely tied with the individual's education, we focus our analysis on people's interest in personal finance issues, sources of personal finance education, and their college education. …