Gender gap in financial literacy: does it matter who wears the trousers?

by Maddalena Davoli & Jia Hou
Posted on July 23, 2020

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.

One explanation to this gap is the division of tasks within couples. If, in a couple, the man mostly specializes in money matters, his partner may have less possibilities to enhance her financial knowledge (Fonseca et al., 2012).

To look at the financial literacy gender gap among household heads, we chose to use German data from a household survey.1 Why? Firstly, despite Germany's generally high financial literacy levels (versus, for instance, the United States, as researched by Davoli and Hou in 2019), the country still exhibits a gender gap in financial knowledge. Secondly, our dataset allows us to distinguish within households: it tells us which member is the most knowledgeable about the family’s finances. Hence, we are able to classify households according to whether the household head and financial decision-maker is male or female.

“Women face a greater risk of living in poverty at old age than men”

Personal finance: a passport to modern economy

Understanding the way households manage their day-to-day finances is an important step towards female empowerment and financial independence. Because of specific features related to female socio-economic situations, low financial literacy can be particularly harmful. Women are often the primary caregivers and experience more work interruptions due to child rearing, they generally live longer and earn less on average than men, facing a greater risk of living in poverty at old age. Even more now with the current COVID-19 pandemic, the burden of the economic recession may disproportionally affect women’s employment, as they are overrepresented in sectors such as tourism, leisure and education, strongly hit by the pandemic.

All of the above, combined with lower financial skills, creates an incredibly unsteady ground, which may easily lead to financial insecurity sooner or later in life. Understanding the channels through which financial literacy may be acquired and the roots at the base of current inequalities is the first step towards designing policies that aim to improve women’s financial knowledge.

Observations so far

From a preliminary analysis of the third wave of PHF data (covering 4,942 households), we can see some stark differences in family size structures between female- and male-headed households.2 Women are slightly more likely to be part of a single-person household, implying that they have to deal with day-to-day financial issues alone, more often than men. When we move our attention to households with more than one individual, the gender disproportion among household-heads is striking: for couples and families with children, way more than half of the households display a male head. In other words: when both partners live within one and the same household, it is more likely that men are in charge of financial decisions.

When we look at differences in economic outcomes, we see that the average yearly income and net wealth for male-head households is respectively over 8,300 euros and over 63,600 euros higher, as compared to the ones of female-headed households. Also, women display an almost 11% lower probability of owning a house. Given the observed disparities in financial knowledge, such differences are concerning. Figure 1 (below) clearly shows that women are much less likely to answer the four financial literacy survey questions correctly. Also, the aggregated financial literacy index (that is, the probability of answering all questions correctly) is 7% lower for women than for men. The economic inequalities mentioned above may arise partly because of inequality in financial literacy.


Figure 2 shows the distribution of gender gap in financial literacy by family size. On average, men provide correct answers more often than women in households of each size, but the gender gap in most financial literacy indicators is bigger for larger households. Knowing that the gap in aggregated financial literacy increases as family size increases, this somehow suggests that women in female-headed households do not necessarily specialize in financial matters as much as men in male-headed households do, as family size increases.

Presuming that dealing with financial matters helps to improve the financial literacy of the financially knowledgeable person equivalently, regardless of the gender, we should expect negligible gender gaps among household heads. However, according to our data, this is not the case. For reasons still unclear, it could be that greater financial decision-making within households correlates with higher financial literacy only for men, and not for women.


Upcoming research

The next step in our research is to better understand the role of within-household specialization, occupation and social norms in driving the financial literacy gender gap. As different occupations and social norms proxied by residence in East/West Germany may encourage or discourage women and men to accumulate their financial literacy differently, the two factors may also be drivers of gender gap in financial literacy. We plan to apply various methodologies, including the ordinary least squares regression and quantile regression analysis, to study the effect of interest.

Maddalena Davoli is Research Assistant at the Department of Applied Econometrics and International Economic Policy at Goethe University Frankfurt

Jia Hou is Assistant Professor at China Center for Special Economic Zone Research, Shenzhen University


  1. The Panel Household Finances dataset, compiled by Deutsche Bundesbank, is the first nationally representative household survey data on finances for Germany. Up until now, it has been conducted 3 times: the first wave including 3,565 households (2010-2011), the second 4,461 households (2013-2014, and the third wave 4,942 households (2017).
  2. In the survey, the head of a household is considered the financial knowledgeable person, who is chosen by respondents.


  • Davoli, M., and Hou, J. (2018). Financial Literacy and Socialist Education: Lessons from the German Reunification. SAFE Working Paper No. 217
  • Fonseca, R., K. J. Mullen, G. Zamarro, and J. Zissimopoulos. (2012). What Explains the Gender Gap in Financial Literacy? The Role of Household Decision Making. Journal of Consumer Affairs 46 (1): 90-106.
  • 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.
  • Lusardi, A., and Mitchell, O. S. (2014). The Economic Importance of Financial Literacy: Theory and Evidence. Journal of economic literature, 52(1), 5-44.