Gender gap in financial literacy and within household specialization

A TFI research project by Maddalena Davoli and Jia Hou
Posted on January 22, 2021

Maddalena Davoli and Jia Hou analyzed the gender gap in financial literacy in the context of German household heads, investigating the relevance of different factors to identify a role for within-household specialization. They document several stylized facts of the gender gap in both financial literacy and economic outcomes and find that being female decreases the likelihood of answering correctly to the three financial literacy questions by almost 8 percentage points.

Read the summary bellow or download the report.


Even though girls do just as well in high school as boys and participate more and more in labour force worldwide once grown up, women consistently display lower levels of financial literacy. This gender gap exists 'across countries with different financial market development and institutional setups, as well as different social and cultural contexts' (Hasler and Lusardi, 2017). Given the positive association between financial literacy and economic decisions (Lusardi and Mitchell, 2014), there's great concern that in dealing with day-to-day financial matters, women may be at a disadvantage.

Our study analyzes survey data from German households and documents the existence of a strong gender gap across households, which is surprising for a country with generally high levels of financial literacy. We suggest possible explanations for the difference in literacy levels between males and females, linking it to factors related to household specialization, such as relationship status and family size, and to societal and cultural factors.

Zooming into the results of our study, we observe that:

Lower financial literacy, lower economic outcomes

Females perform worse than males on all financial literacy questions we look at on inflation, interest rate and risk diversification. With respect to male respondents in the survey, women display an almost 8% lower probability of answering correctly, regardless of their educational or social background. Overall, men tend to do better also in regards to generating monthly income and net wealth. As pointed out by other studies, such as Lusardi et al. (2017), the disadvantaged place of female households in financial knowledge calls for attention as a potential driver of the gender gap in economic outcomes.

Better off alone?

According to Becker’s marriage model, within a family, different members can specialize in different activities, based on their preferences and abilities. If men, as it is more often the case, tend to be the one dealing with money-related issues, then women may have fewer possibilities to enhance their financial knowledge (Hsu, 2016). We cannot, unfortunately, compare individuals belonging to the same family to test an actual within-household specialization hypothesis. However, we perform complementary analyses, to hint towards an explanation based on within-household specialization.

First, we expect that, since men are normally the financial decision makers within couples and the financially knowledgeable person, then married, divorced and widowed women should exhibit particularly low levels of financial knowledge, as they had less incentive to develop this particular type of literacy (contrary to single women). As you see in Figure 1, female household heads who are married and live with their partner indeed exhibit a much lower probability of being financially literate than single women, though only in the West of Germany.

Figure 1: Gender differences in Financial Literacy by Marital Status and Residence

Note: The bars represent the percentage of female (male) correctly answering all three questions on financial literacy, split by household residence, according to the marital status of the household head (“with a Partner” are all households either married, divorced or widowed). Three waves of data are used, for roughly 12,000 observations; data are weighted to be representative of German population.

Also, across families of different sizes, we observe a similarly interesting pattern, in line with the specialization hypothesis: while a gender gap in financial literacy is present in all multiple-members households, for one-member households the gap vanishes entirely. That is, when no specialization is involved (single-member households), a gender gap in financial literacy is not present.

However, our empirical results do not fit entirely with the specialization hypothesis. If within-household specialization is the only factor shaping financial literacy, we should expect negligible gender gaps among household heads for families of any size, as financial literacy is always measured for the financial knowledgeable person of a given households. Regardless of gender, household heads should be more specialized in financial matters. This is suggestive of the fact that within families, women in bigger households do not necessarily have the chance to specialize in financial matters, even when they are the household heads. It could be that greater financial decision making within households correlates with higher financial literacy only for men and not for women. Alternatively, other factors such as within household spillover effects might play a role in cancelling the impact of within household specialization.

A role for social and cultural norms?

Some of our results also reveal that men and women may have different production processes for financial literacy, as already suggested by Fonseca et al. (2012). Using a decomposition technique, we see that factors normally used to explain differences in financial literacy leave a huge portion of the gender gap unexplained. Also, women in the West seem to have, comparatively, an advantage over their counterparts in the East, across different samples of our data. East Germany is a region which proved to differ widely from the West because of social and economic differences shaped throughout the course of history. These factors together motivate us to claim that possibly societal and cultural factors not observed in the data are also affecting the financial literacy levels of men and women differently, through social norms rooted in past history and within-families culture.

Policy implications

Our results call for a discussion of programmatic solutions to empower women around the world, even in quite advanced economies such as Germany. Women, as primary caregivers and child-bearer, face unique financial challenges that put them at a greater risk of living in poverty at old age. Already before the pandemic, women were disproportionately less knowledgeable about economic issues, being hence particularly exposed to and ill-prepared for the negative economic impacts of the Covid-19 pandemic. A first step to provide women with the needed set of skills and knowledge is to truly understand the origins of the financial literacy gender gap to correctly address it. As specified, we cannot properly analyze the specialization hypothesis because of lack of more detailed data, but our results suggest a need for interventions operating at the household level, aimed at redistributing roles and specialization within household. Also, some heterogeneity emerges in our analysis, pointing at the fact that women who have children, are married, or live in the East of Germany may be a specifically fragile group, and hence more of a policy concern. The whole of society can benefit from increasing women’s access to financial services and promoting their financial well-being.


  • Hasler, A., and Lusardi, A. (2017). The Gender Gap in Financial Literacy: A Global Perspective. Global Financial Literacy Excellence Center, The George Washington University School of Business.
  • Hsu, J. W. (2016). Aging and strategic learning: The impact of spousal incentives on financial literacy. Journal of Human Resources, 51(4), 1036-1067.
  • Lusardi, A., Michaud, P.-C., and Mitchell, O. S. (2017). Optimal financial knowledge and wealth inequality. Journal of Political Economy, 125(2):431–477.
  • Fonseca, R., Mullen, K., Zamarro, G., and Zissimopoulos, J. (2012). What explains the gender gap in financial literacy? the role of household decision making. Journal of Consumer Affairs, 46(1):90–106.