4 Busted Myths About Women and Money

casual woman with curly hair and retro outfit

For too long, the myth that women are somehow bad with money has perpetuated our media, marketing, and minds. Advice based on these false assumptions conveys that women are at fault. If they only negotiated harder, took on more risks, and (in short) acted more like a man, then they would succeed.

This view ignores penalties leveraged against women when they attempt the same strategies as men. Rather than being more like a man in a man’s world, we should make the world more equitable in the first place.

To do this, it’s time to call bullshit on four myths about women and money.

Woman counting bills behind the title: 4 Busted Myths about women and money

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Myth: The Wage Gap Exists Because Women Don’t Ask For More

Women, on average, earned only 80.5 cents for every dollar earned by men in 2017 (women of color fared much worse at 60.8 cents). This persistent pay disparity is the wage gap. Its causes are multi-faceted and the source of much debate.

The wage gap persists regardless of industry, occupation, education, and hours worked. A study from Cornell University controlled for all of these elements and 38% of the gap remains unaccounted for, leading researchers to conclude that discrimination and unconscious bias continue to play a role. Some critics propose an alternate explanation: what if the disparity is because women simply don’t ask to be paid more?

The myth puts the onus on women to negotiate harder, get grittier, and ‘be a man’ in a male-centric workforce. The fact is, women are asking just as much as men, they just aren’t being rewarded for it.

“It’s not because women are asking for less: Women are offered less, and women are more likely to be turned down when they ask,” says Helaine Olen, author of Pound Foolish: Exposing the Dark Side of the Personal Finance Industry in an interview with TheMuse

Contrary to the common belief that women are just not negotiating, the fact is that they do ask; they just don’t get. Women are one quarter less likely to receive a raise, even though they ask for raises with the same frequency. It is critical that we root out unconscious bias and address our promotion and hiring policies to objectively assess performance.

Bonus: Myths about women asking for less also extend to applying for jobs.

You might have heard this oft-repeated stat: men will apply for jobs if they meet 60% of the requirements whereas women will only apply if they meet 100%.

It turns out that this ‘factoid’ came from a confidential, internal report compiled from private interviews with executives at Hewlett-Packard. No scientific study proved the statistic. We should encourage people to stretch themselves when they apply for jobs– but I was still surprised to learn that this ‘fact’ has no statistical backing.

Myth: Women are Worse Investors

A survey conducted by Fidelity on women and money reported that only 9% of women thought women’s portfolios would outperform men’s. In fact, the opposite is true. Women’s portfolios consistently outperform men’s year over year.

'Fearless Girl' statue face off Wall Street Bull in New York
Courtesy of Volkan Furuncu/Anadolu Agency/Getty Images (Photo by Volkan Furuncu/Anadolu Agency/Getty Images)

One study of 35,000 households showed that women stuck to their investment plans while men traded more. This meant that compared to women, men’s average returns were a full percentage point lower.

Say goodbye to Wolf of Wall Street, and hello women of Wall Street.Click To Tweet

Fidelity compared the investing behavior of 8 million retail customers and found that women outperformed men by 40 basis points, or 0.4%. As the study explains, “At first glance this may appear to be a negligible difference, but it can have a significant impact over time.”

Then Why Do Women Invest Less?

Even though they tend to perform better, women still invest less than men. So far, the reasoning goes that it is because they are more risk-averse. The study Gender Differences in the Investment Decision Making Process proposed an alternative explanation: women would invest more if they earned more.

woman stacking pennies on a hand
People who earn more tend to take more risks in the stock market

The study found that high-earning women were more likely to put their money in the stock market. As women are less likely than men to be high earners in the first place, it makes sense that they invest less as well.

It’s appalling that 91% of women doubt their own gender’s competence, but not surprising when one takes a look at the financial industry. Only 16% of financial advisors are women despite their proven prowess as investors.

By trumpeting women’s success when they do invest, hopefully we can close the investment gap.

Myth: Women Are Spending Too Much To Save

You don’t have to look far to see a woman in a movie swiping her credit card and glorifying shopping.

In fact, men make compulsive shopping decisions at the same rate as women. Bundle aggregated spending data by gender from the U.S. government, spending transactions from Citi, and third-party services like Venmo. They found that aside from clothes and personal care, men spend more on just about everything else.

Graphic of singles spending men vs. women from bundle
from Business Insider

This is critical because advice is written based on the misconceptions of the female shopper. Financial articles define women as ‘excessive spenders,’  which then advise women to limit their ‘splurges.’ Meanwhile, articles geared toward men use words like, ‘dare’ to ‘invest’ in order to have ‘power’.

Advice columns direct men to invest while they encourage women to hunt for bargains to save. Women are not the mindless shopping mavens they are made out to be in the media, and they are making big money moves.

Myth: Women Don’t Make The Main Money Decisions

Until as recently as 1974, women had to have a man to cosign for any bank loan. Her income and reputation didn’t matter. The bank considered any man more responsible than a woman for handling a loan.

Among parents with children under 21, 69% of fathers and 52% of mothers are fine with their daughter’s future spouse taking the lead on financial matters. This is a problem as many women will have to manage their own finances at some point in their life.

As women’s life expectancies increase and the rate of divorce for individuals over age 50 continues to climb, more women will find themselves solely responsible for their own finances. – UBS Survey

Money has been considered a man-only domain for far too long. We still see men as the drivers of money decisions, yet women hold more than half of the wealth in the US and make 70-80% of the decisions around consumer purchasing. Now that women can legally have their own credit cards and have rights to marital property (that happened in 1981), they are flexing their own financial muscles.

Takeaway

New research on gender and money is constantly emerging. It is critical to root out the facts from the myth. Misinformation spreads like wildfire, hot takes become taglines, and information we thought we could depend on is actually false.

Despite all of this, we are making headway. Each busted myth is a step forward as more women take the reins of their financial lives. The wage gap shrinks each year as companies implement pay transparency and non-negotiable job offers. With the advent of equal pay, we will hopefully see an increase of female investors. Money is power, so to achieve gender equality there must be wealth equality.

28 Comments

  1. I love everything about this article. I would love to see some academic research into women applying for jobs, because anecdotally in education, I feel like that’s true. (I’ve talked to women who won’t apply for positions unless they check all the required AND preferred boxes; men will stretch even if they are missing a “required” qualification).

    I also find that it is easier for people to label women’s spending as “frivolous” by men, even though spending on appearance has a much stronger correlation to women’s incomes than it does to men’s. Like even in the PF/FIRE world, lattes are villainized, while craft beer is lauded. I’m sure that has nothing at all to do with the gender breakdown of the preferred tasty beverage. Nothing at all (see my eyes rolling here).

    1. I would love to see some research to back it up as well!

      Yes, I definitely agree. Men’s spending is seen as necessary– a watch is a necessary tool right? It has nothing to do with status… And a woman’s make up is only about vanity right? It has nothing to do with her making a living… I also never really connected the way the PF/FIRE space divide lattes vs. craft beer. I hadn’t considered the gender breakdown there either but wow you are so right!

  2. I’d also like to add that even in FIRE, makeup seems labeled as shallow and villainous, while things like CrossFit are lauded… anecdotally, I’d say it seems men spend more on electronics, cars, and the aforementioned craft beer, which are culturally acceptable, while women’s “personal care” and clothes spending are seen as frivilous. Yet it would take a whole lotta nice blouses to equal one vehicle, and a lot more makeup to equal an iPhone, etc.

    1. Good point. We’re all socialized to buy into certain things and the things men buy into tend to be lauded for being useful tools, whereas women’s purchases are seen as more frivolous. Even in the fitness sector– the respect for CrossFit is huge but Zumba and Yoga? Not so much. Unfortunately, you’re right that it translates to people handing out advice in the FIRE community as well.

  3. Thank you for tackling this important topic. Unfortunately, women have been seen as incompetent in many areas for far too long, simply because historically they weren’t allowed to learn about those areas or perform those tasks, not because they CAN’T do them. I remember in college I used a Candid Camera clip for a presentation from at least the 1950s. It featured people getting ready to board a plane, who were told the pilot was a woman. BOTH men and women were severely distressed at the idea of a woman pilot. It seems funny now, but that wasn’t that long ago.

    1. That clip sounds interesting and also it makes me so sad. Hopefully now we are all severely distressed by their sexism! It’s unfortunate that women can prove over and over that they are capable and yet still fight against these entrenched doubts.

  4. Can’t believe women had to have a man cosign for a loan right up until 1974!

    I have to say, I always thought Myth 1 was based on verifiable research so it shows how certain “facts” just enter our consciousness and we don’t question them anymore.

    1. On articles like this I try to read as much as I can about both sides. I did find some convincing arguments against Myth 1 in an article written in 2014 called The Confidence Gap. However, this article also references the confidential report from HP, and some of the other ‘studies’ it references were based on a sample size of fewer than 100 students! I found the study about women asking the same amount to have more compelling research behind it overall.

  5. Powerful reflection (as always) with some fantastic and interesting stats. Thank you!

    “Rather than being more like a man in a man’s world, we should make the world more equitable in the first place.”

    I think this is such a powerful quote. I remember really diving deep to understand my ambition as a young girl and wondering how much easier it would be to be a boy. How sad is that? To be thinking such thoughts in elementary school? I haven’t reflected on it for a long time until this post. I had two older brothers and they seemed to sail through issues without having to process them as much as me. This could be because of a lot of factors. Either way, I love being a woman now, but it took me so long to get here (feeling comfortable and not confused with my gender role, loving my body in a healthy way, respecting myself as a career-oriented person and mother, etc.) It’s amazing how this has everything (and yet nothing) to do with money. Fascinating stuff!

    1. I had the exact same experience in elementary school. I vividly remember wishing that I could be a boy instead. I was a ‘tomboy’ for most of the time growing up because I enjoyed things I thought only boys were supposed to enjoy: running around at recess, digging for bugs, and playing soccer. Of course, these are things that all kids enjoy, regardless of gender! It’s no surprise that women take a long time to learn to love themselves in a world where they are constantly advertised that they need to do better, look better, be better.
      Thank you for your thoughtful and insightful comment (as always!) 🙂

  6. Love all the thoughts and effort that went into this. It’s liberating to dispell the myths that are out there and realize that rather than “leaning in” to the current paradigm, we can just throw the whole thing out and do it our way. I hadn’t ever considered Abby’s ideas (in the comments) above about the FIRE movement encouraging male-centric purchases and discouraging (more typically female) purchases like make-up, etc. A lot to think about… Thank you!

    1. Yes yes yes! It’s important to remember that the workplace– everything down from the set hours, office temperatures, and customs were originally set with men in mind. Now women make up half of the working population, so it’s time to rethink the paradigm!

      I was happy that Abby added that bit as it wasn’t something I had really thought about either in the FIRE community. We can do better! Thanks for reading 🙂

  7. It’s interesting that it’s a myth that women apply to jobs less often then men based on their qualifications. I guess I assumed this to be true because I know women who in the past apply to jobs because they didn’t meet all of the requirements. And I had to tell them, “No! You meet some of them. Apply anyways!” And it’s crazy that no matter what, in the past women had to have a man co-sign a loan for them. We’ve come quite a ways from the past, but clearly still have a ways to go looking at these myths. Enjoyed reading this!

    1. To be fair, it might actually be true! It’s just a stat that came from a questionable source, so I would want more evidence to back it up. I have heard that anecdotally many find it true. Either way, it’s good you were there for those women who doubted themselves! We definitely have a ways to go, but we’re getting there.

  8. This is definitely an interesting/difficult topic to tackle! You could probably have a blog dedicated to just this subject.

    As a man, I have no issue if a woman were to be in my exact position doing my exact job and earned exactly what I do. A company that pays people based on their genders is no company I’d like to work for.

    I do believe a few factors need to be thrown into the statistics though. One being that there are more men in dangerous jobs than women. More men die on the job than women. But if the same job is being performed and the two individual genders are performing at the same quality, I see no reason for a man to be paid any more than a woman.

    1. Yes, essentially the issue is that if a woman is to be in your exact same position doing your exact same job, she is likely to be paid less. Also, if she does the same dangerous job and takes on the same amount of risk as a man, she will also be paid less. The gender pay gap looks across industries to take the dangerous job factor into account. The study also mentions that it looked into male advantages that might account for the gap, like “risk aversion and propensity to negotiate or compete” (or, you could say, doing more dangerous work) but countered that women would also have advantages in some other areas that ought to make up the difference. Overall, I think we both agree that equal pay for equal work is the goal.

      1. Yeah I’m definitely for equal pay for equal work, in all fields. My wife faced this issue when she was working in construction on movies. Guys who had less experience and who were half as hard workers would end up getting paid a higher rate than her.

        Hopefully the attention this issue is getting will keep it’s momentum and we’ll seem some good statistics in the future.

  9. This is an thought provoking one. I never thought of financial articles pushing role duties but I can see it now. Even on TV, the advertisement of saving and coupon tends to use women and the investing companies use men.

    A nation can rise no higher than its women.

  10. I am impressed how much research you put into your posts! It gives them validity and makes them more meaningful
    As a woman, society, in subtle ways leads you to believe you are inferior and less important and you start to believe it and then it is hard to unlearn.
    I struggle with this even though I consider myself the fixitlady and am the breadwinner with a husband who stayed at home to raise the kids. I am reading the book ‘The Power’. It is an interesting look at a dystopian future world where women are in charge! You may enjoy it.

    1. Gaining confidence in oneself and unlearning some of the damaging narratives we were told while growing up is a huge element of pushing past sexist and racist (and other -ist) stereotypes. Interesting book, I think we learn a lot about sexist scenarios by flipping the gender and imagining what would happen if it were the other way around. Thanks!

  11. I recently found your blog and I *love* this post, so much.
    Especially this: “women would invest more money if they earned more money”!!!!
    All of the exclamation marks are required. Thank you for publishing this post!

    1. I realized through researching for this article that sometimes the studies are buried really deep, and lots of publications will just quote each other!

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