Gender differences in financial literacy among teenagers - Can confidence bridge the gap?

Abstract

This paper investigates the moderating effect of confidence on the gender gap in financial literacy based on a nationwide survey of German high school students. Two measures of confidence are applied while controlling for cognitive abilities and several independent variables. This study shows that confidence is indeed a strong force in bridging the gender gap, especially for everyday financial concepts. However, significant sex differences persist for more sophisticated financial literacy tasks when confidence variables are introduced in the regression models. Moreover, this paper indicates a significant confidence gap between male and female participants and finds that explanatory characteristics of confidence vary with gender as well. Expertise in the form of increased mathematical abilities and economic education is suggested as a promising confidence-building measure for women. The results suggest that differentiating financial literacy into basic and sophisticated literacy greatly increases interpretability when studying gender differences. Furthermore, the findings have important practical implications for understanding and, thus, closing the gender gap in financial literacy and highlight the political need for financial education in early stages of life that combines theoretical knowledge with confidence building measures.

Keywords:

• Financial Literacy
• gender differences
• confidence
• cognitive abilities
• self-perceived financial literacy

JEL classification:

• D 14 (personal finance)
• G53 (financial literacy)
• I21 (analysis of education)
• J16 (Economics of Gender)

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1. The first publication of the 13-item scale was as a working paper in 2009.

2. Medium grades (3 and 4) were summarized to one option resulting in 5 different answer possibilities. The variable order was subsequently reversed to enable a straightforward interpretation of the results so that very good knowledge is grade 6 and no knowledge at all is grade 1.

3. The educational system in Germany is overseen by the individual states. Nevertheless, the general organization is comparable across all 16 German states (Dustmann, 2004). After completing four years of elementary school (six years in the states of Berlin and Brandenburg), students advance to secondary education. Students receive a recommendation for one of the three main secondary school types, based on academic performance (Winkelmann, 1996). Students with the lowest academic achievements in elementary school proceed to the Hauptschule, where the aim is to prepare them for vocational training. Students with intermediate grades are recommended for the Realschule/Mittelschule with the aim to prepare for vocational training or further studies. The best students progress to the Gymnasium with a focus on further studies (Erner et al., 2016; Lührmann et al., 2015).

4. The risk association was assessed as suggested by Grable and Lytton (1999) by providing four answer possibilities: two in the context of chances and two in the context of threads.

5. I follow the logic of Jann (2008) by applying a pooled regression with an inclusion of gender as the group indicator within the regression. The R package of 2018 was used for the application.

6. Calculated by dividing the explained difference by the total difference.

7. However, they conclude that gender differences persist, even among professional fund managers.

Additional information

Funding

The author received no direct funding for this research.