The differences between the sexes can be a pretty touchy subject. Whenever you talk in general terms about men and women, you must pick your words carefully so you don’t sound like you’re promoting sexist stereotypes. Sometimes it seems safer to ignore the whole idea and stick to talking about “people,” as if men and women were entirely the same.
But the reality is that there are some areas where that’s clearly not true – and money is one of them. From the things they spend money on to the way they invest, men and women take different approaches to dealing with money. Men are more likely to make certain types of financial mistakes than women, and vice versa.
Being aware of these differences can help you better understand your own money habits. It can open your eyes to strengths and weaknesses you share with others of your gender, and help you find ways to handle your money that work with your instincts, not against them.
Many people – especially humorists – have observed over the years that men and women have different shopping habits. For instance, one popular cartoon, published at Know Your Meme, shows the different paths taken by a man and a woman shopping for pants at the mall. The man goes straight into one store and back out again with a single pair of pants, while the woman wanders all over the mall and comes out with hundreds of dollars’ worth of goodies.
This is an obvious exaggeration, but there’s a grain of truth to it. A 2007 study by the Wharton School of Business titled “Men Buy, Women Shop” found that women tend to view shopping as an activity, while men focus strictly on the goal. They want to go into a store, buy what they want, and get out as quickly as possible. Women care more about the store environment and the attention they get from salespeople.
Men and women differ not just in how they shop, but also in what they like to shop for. A 2015-2016 Consumer Expenditure Survey by the Bureau of Labor Statistics highlights several differences in spending choices between single women and single men. Here’s how the sexes stack up in different areas:
- Total Spending: Single men spent slightly more than single women overall – $35,018 as opposed to $33,786. However, the men earned roughly $10,000 more per year than the women. Both sexes ended up spending more than their after-tax income, but the women were over budget by a greater amount.
- Food: Single men spent more on food than single women. Their annual food bill was $4,173, as opposed to $3,680 for the ladies. They also spent much more on alcoholic beverages – $537 per year compared to the women’s $234.
- Clothing: Not surprisingly, women spent more on “apparel and services” than men. Their annual cost came to $1,140, while the men spent only $813. Women also spent $595 a year on personal care products and services like skin and hair care – more than twice as much as the men’s $233 per year.
- Cars: Men spent more than women on personal transportation – a total of $5,507 per year as opposed to $4,273. Nearly all of that difference was for car-related expenses, such as vehicle purchases, gas, and maintenance. For public transportation, the two sexes spent about the same.
- Entertainment: Men and women spent roughly the same amount each year on entertainment. However, they split up their entertainment budget in different ways. Men spent an average of $835 on “audio and visual equipment and services” but only $206 caring for pets. Women, by contrast, spent $725 on their home theaters and $488 on their pets.
Studies suggest that women tend to be more price-conscious shoppers than men. For example:
- Outlet Shopping. A 2008 study by New Zealand’s Massey University found that women were more likely than men to shop at outlet stores, which offer name-brand goods at lower prices. Men prefer to shop at traditional department stores, which charge full price but have a wider selection.
- Shopping Sales. Women are more likely to look for sales when shopping online. According to an infographic by PaymentSense, 71% of women say the last item they bought online was on sale, compared to only 57% of men.
- Buying Store Brands. A 2015 Nielsen study indicates that women are more willing than men to switch to store brands and other less expensive grocery brands. Over 40% of women said that they had changed to cheaper grocery brands to save money, while only 30% of men had done the same.
- Daily Deals. Women are more likely than men to belong to the deal site Groupon. A 2014 YouGov survey found that 43% of American women had taken advantage of a Groupon daily deal, while only 34% of men had done the same.
- Coupon Use. In general, women are more likely than men to use coupons for online purchases. However, in-store purchases are another story. According to CouponFollow’s 2017 Millennial Shopping Report, 74% of Millennial women seek out coupons when shopping online, compared to 65% of Millennial men. But 55% of Millennial men say they search the Internet for coupons to use in-store, compared to only half of their female peers.
The differences between men and women as shoppers are pretty clear-cut. When it comes to saving, however, the picture becomes more complicated. It’s difficult to say which sex is “better” at saving, as it all depends on how you measure.
In terms of dollars, men save more. A 2015 study by BMO Bank found that the average man has nearly twice as much stashed in an emergency fund as the average woman. Similarly, a 2015 BlackRock survey reported by CNBC found that American women approaching retirement age had an average of $81,300 in retirement savings, while their male counterparts had $118,400. A 2013 analysis by TurboTax found an even bigger difference: Over the course of their lifetimes, men save more than three times as much money, on average, than women do.
But this doesn’t mean that women aren’t squirreling away as much of their paychecks as men. On the contrary, a 2017 study by Fidelity found that women save a slightly larger percentage of their income than men do, both in workplace retirement accounts and in outside accounts like IRAs. Similarly, a 2017 Vanguard survey found that women are more likely to take part in workplace retirement plans, such as 401k and 403b plans, than men earning the same level of income. Women also put more of their pretax earnings into these plans: between 2% and 8% more than their male coworkers.
The problem is that, while women are saving a larger share of their earnings, those earnings are smaller than men’s. If a woman making $30,000 saves 10% of her salary, while her male coworker with a $40,000 salary saves only 8%, he’ll still end up with $200 more in his account each year. That’s not a huge difference, but thanks to the power of compound interest, it will add up to much bigger savings over time – especially if he continues to earn more and save more than she does year after year.
Adding to the problem is the fact that women are more likely than men to take time off from work while their children are young. Even if they’re only away from the workplace for a few years, that’s a few years during which their salaries – and their savings – drop to zero. By the time they return to work, they lag behind their male peers in both income and retirement savings, making it difficult to catch up. In a 2017 survey by GoBankingRates, over 40% of women said that not saving enough was their biggest financial regret, while only 33% of men said the same.
Some experts suggest that another reason women have more trouble saving enough for retirement is that they’re more cautious about investing. This is purely speculation, but what is clear is that men and women have different approaches to investing. These include:
- Men Show More Interest in Investing. The 2015 BlackRock survey found that men as a group are more interested in investing than women, and they enjoy managing their money more. Younger women take a more active interest in their investments than older ones, but they still lag far behind their male counterparts. Only 36% of Millennial women say they enjoy managing their investments, compared to 70% of Millennial men.
- Men Know More About Investing. Perhaps because men are more interested in investing, they’re also more knowledgeable about it. A 2014 report from the Global Financial Literacy Excellence Center shows what happened when both men and women around the world took a test covering four financial concepts, including interest and inflation. Only 51% of women from countries with “major advanced economies” understood at least three of the four topics, compared to 59% of men. A similar survey carried out by Statistics Canada in 2014 found that 22% of Canadian men could correctly answer five out of five questions on key financial topics, while only 15% of Canadian women could.
- Men Are More Confident With Money. Experts say women tend to have less confidence in their money skills than men. A 2017 report by Canada’s Mylo Financial Technologies found that female users of the service were much more likely than male users to say they know little or nothing about investing. Only 8% of women said they were “very knowledgeable” or “an expert” when it comes to investing, compared to 25% of men. This lack of confidence is especially common among single women. According to the Fidelity study “Single Women and Money,” single women are less likely than any other demographic group to say they’re knowledgeable about investing, saving for retirement, or creating a financial plan.
- Women Seek Help More. As noted above, women are more likely than men to invest in their workplace retirement funds. However, women’s lack of confidence and investment knowledge can make them unwilling to plunge into investing on their own. Nicole Sherrod, a director at TD Ameritrade, says in a Kiplinger interview that 69% of her firm’s individual accounts are held by men. That said, women’s lack of confidence about financial matters can actually work in their favor, as it makes them more willing to seek help from others. Kiplinger reports that women are more likely than men to call on a financial professional to help them manage their portfolio. And when they invest on their own, they tend to research investments more carefully before buying than men do.
- Women Focus More on the Long Term. Women don’t just invest differently from men; they also think about their investments differently. Financial experts say men tend to turn investing into a competition, focusing on their portfolio’s performance and swapping tips about hot stocks. Women, by contrast, are much more focused on long-term goals – not just for themselves, but also for their families. Instead of aiming to earn the highest possible return, they think about whether they’re on track to retire in 20 years, pay off their mortgage, or put their kids through college.
- Women Trade Less Often. Because women are focused on the long term, they pay much less attention to short-term shifts in the market. Men are much more active and impulsive as investors, making frequent trades in an effort to boost their return. Women, by contrast, are much more likely to buy and hold. The Fidelity study found that men are 35% more likely to make trades than women, and they make about 55% more trades each year on average. This more frequent trading can hurt men’s returns in three ways: they end up paying more in brokerage commissions, they pay more in taxes when they sell stocks at a profit, and they run more risk of trading in a good investment for a new one that doesn’t perform as well.
- Men Take More Risks. The BlackRock survey found that women tend to have lower investment risk tolerance than men. About 41% of men say they’re willing to take on more risk in order to get a better return on their investments, while only 22% of women say the same. The Mylo study found similar results, with women about half as likely as men to say their investment strategy is “highest risk, for highest potential return” and twice as likely to say “I do not want any loss whatsoever.” This leads women to focus more on safe investments, such as bank accounts. A CIBC poll of Canadian women reported in Newswire found that women typically invest nearly half their retirement savings in savings accounts and other guaranteed products.
- Women Get (Slightly) Better Returns. Since riskier investments tend to offer higher returns in the long run, it might seem obvious that men’s higher tolerance for risk would translate to better returns. However, sources suggest that this isn’t always the case. Financial planner Cathy Curtis, speaking with CNBC, explains that men “sometimes invest too aggressively,” thinking they can beat the market. This strategy can backfire and lead to big losses. Women’s more conservative investments produce smaller gains but also smaller losses, putting them slightly ahead over the long term. The 2017 Fidelity study found that on average, women’s investment portfolios earned 0.4% more than men’s in 2016. More importantly, women lose less money in a downturn. Women’s portfolios dropped by an average of 2.5% in 2015, while men’s fell by 3.8%, according to Kiplinger.
Women’s greater caution with money also applies to debt. It’s not that men are more likely to borrow money than women; the 2017 Vanguard survey found that both sexes use loans at about the same rate. However, the way they use debt is very different.
Amount of Debt
Men tend to carry more debt than women, though sources disagree over just how much more. A 2016 analysis by Experian shows that women carry an average of 3.7% less debt than men overall, and their average mortgage loan is 7.9% smaller. The Vanguard report found that men had borrowed an average of $10,424 to women’s $8,755, a difference of about 16%. And a 2017 study by GoBankingRates found that men had an average of $95,057 in debt compared to $31,037 for women – more than three times as much.
However, this isn’t true for all types of debt. For instance, Credit Sesame reports that women have more student loan debt than men, and they take longer to pay it off. Women are more likely to go to college, so they’re more likely to have student loans, but they also get paid less, so they have a harder time paying off those loans after they graduate.
Men and women also have different reasons for borrowing money. A 2018 study at American University found that men are more inclined than women to borrow money for luxury goods they wouldn’t be able to afford otherwise. Women, by contrast, tend to use debt to “smooth consumption” – that is, to make ends meet when they’re going through a rough patch. They’re much more reluctant to borrow money for nonessentials.
Paying Off Debt
Women are also a bit more diligent about paying off debt than men. According to the Experian study, women are about 8% less likely to fall behind on their mortgage payments than men. Women also have slightly higher credit scores, averaging five points more than men.
Even though men are more likely to run into problems with debt, they’re less likely to seek help in dealing with them. Credit counselors interviewed by Bankrate say the majority of their clients – about two out of three – are female. Men are more likely to put off seeking help with credit until “just before the creditors showed up at the door,” according to one certified credit counselor.
Men and women also have different approaches to paying off debt. The experts in the Bankrate article say women usually look for ways to cut expenses in the household budget, while men tend to focus on trying to increase their income. (The best approach, according to experts, is a combination of the two.)
Hopes and Fears
Men and women differ not just in how they use money, but also in how they think about money. Their top financial goals, as well as their greatest financial fears, are similar, but they put different amounts of stress on each one.
Men and women have fairly similar financial goals overall, but there are subtle differences in which ones they focus on most. For instance, a 2018 survey by The Motley Fool found that men were most likely to name saving for a vacation as their top financial goal, followed closely by paying off credit card debt. For women, these were still the top two goals, but in the opposite order. Women were also more likely to name improving their credit and paying off student loans as goals, while men were more likely to mention buying a home, buying a car, or finding a new job.
Although men and women are largely in agreement over their goals, they differ considerably in how much money they earmark for those goals. The 2017 Mylo study found that men as a whole aimed to set aside nearly twice as much money for their chosen goals ($47,810) as women did ($24,843).
This pattern was similar for other goals. Men aimed to raise 67% more for a gift or major purchase, 56% more to start a business, and 42% more for a house. The only goals for which women set slightly higher targets were health, weddings, and education.
Why do women set more modest financial goals than men? For starters, women earn less, so they can’t realistically expect to raise as much money. It could also have something to do with confidence. Men are more confident in their investing abilities, so they’re more willing to set ambitious – though possibly unrealistic – targets.
Men’s and women’s fears about money, like their financial goals, are slightly different. Both sexes worry about the same things in general, but they differ in which things worry them the most.
A 2017 survey by GoBankingRates asked 2,500 Americans to name their biggest fear about money. The top answer for men was “Never being able to retire,” with 23% of the vote. However, this was only the second most popular answer for women, whose top concern was, “Always living paycheck to paycheck,” named by 25% of women and only 17% of men. “Living in debt forever” was the third choice, with 17% of the male vote and 18% of the female vote.
Fidelity’s “Single Women and Money” study found similar results. In that study, the top three money concerns for both single women and single men were living comfortably in retirement, paying down debt while still saving for the future, and being able to pay bills if faced with a job loss. However, all three of these were greater fears for women than they were for men. Roughly one-third of all single women named them as fears, as opposed to roughly one-quarter of single men.
It’s not surprising that women are more likely to worry about the future than men. The gender wage gap has narrowed in recent years, but there’s still a big difference in women’s overall earnings compared to men’s, which translates to an even bigger difference in savings. Even though women are working just as hard as men – if not harder – to save money, invest wisely, pay off debt, and cut expenses, they’re still much more likely to find themselves falling short when it comes time to retire.
There’s no definitive way to say whether women are “better” with money than men, or vice versa. Rather, each sex has its own particular strengths and weaknesses, and both could learn a few useful lessons from each other.
For instance, women as a group would be better off knowing a little more about basic financial concepts like compound interest and inflation. They’d also benefit from having more confidence in their ability as investors, so they’d be less likely to procrastinate when it comes to investing outside of a company plan. Additionally, they could take a page out of men’s book when it comes to taking risks with their money to get a higher return.
Men, on the other hand, could benefit from a dose of women’s caution and prudence with money. They could avoid many problems by being more cost-conscious when shopping, more wary of debt, more diligent about investing in their workplace plans, and more willing to do research before they invest. They could also learn to seek help when they need it, whether that means getting investment advice or seeing a credit counselor.
What do you think is the biggest difference between men and women where money is concerned?