Mars and Venus and the financial plan

He spends all his cash on golf clubs and she won’t stop buying handbags… Enough of the gender stereotypes. Do men and women really have different approaches to money? Our recent survey suggests they might – with implications for how they approach financial advice.

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Who’s better at managing their finances – men or women? Sorry, that was cheap. Generalisations about the genders have always been around, and surely the only true one is that both men and women love to argue about them. You’ll read many unverified claims that men can’t multi-task, women can’t read maps, women are better communicators and men are better at ironing (but just don’t do it). And there has been much debate about the contrasting ways that men and women view money, in publications as diverse as Financial Advice for Independent Women by the blogger Mrs Moneypenny, and the Women and Retirement Report 2014 from Scottish Widows, to name just two.

The recent Advice Moments survey by unbiased.co.uk looks at how people approach life’s big events, and how likely they are to see financial advice in each case. Although it wasn’t the primary focus of the survey, our findings did reveal interesting differences between the way men and women responded to certain questions. Did this suggest a fundamental gender split in how people think about finance?

“Yes, of course I’m okay to drive…”

For most of life’s big events, we found that men were slightly more likely than women to seek professional financial advice. But even more notable were the responses from people who had chosen not to seek advice at these key moments. The reasons that women gave for not seeking advice tended to be more varied, but men were most likely to say that they felt confident in their own judgement, or that they didn’t think an adviser would sway their decisions. Many women said this too, but not so large a proportion. So it appears that men are far more confident about financial matters.

But confidence isn’t the same as knowledge or knowhow. We think of confidence as a good thing, but if it’s not backed up by competence then it can become a liability. Is it that men lie about their abilities?

In the Scottish Widows report, men generally claimed a greater financial knowledge than women. In some responses this was especially marked: 20 per cent of men said they had a good understanding of stocks and shares ISAs, against just 9 per cent of women. And 22 per cent of men said they fully understood pensions, as compared to 15 per cent of women. But do they really? In the same survey, 22 per cent of men believed that the minimum pension contribution of 8 per cent would be enough to give them a comfortable income in retirement. Only 12 per cent of women thought the same. Who’s right? Most pension advisers would side with the more pessimistic women. On those figures, a lot of men are being unrealistically hopeful.

Women are less likely to think that the minimum pension contributions will see them comfortably into old age. Why do they hold this more realistic view? One reason may be that it’s more often the woman who is in charge of the household budget, even if she isn’t the primary earner. Women are more likely to know the price of the weekly shop, they open the bills more often, they tend to be the ones buying the children’s clothes and so on. For a man working full-time, a lot of this everyday expenditure may become invisible or taken for granted. Over time, this can lead to a skewed perception of the real cost of living.

Try to see it my way

If it’s true that men and women perceive money differently, then it’s as much down to culture or environment as anything biological. Women still tend to earn lower average pay, and to work fewer hours because of other commitments. Women who want a family know they will need at least one career break, possibly several, thus further hindering their progress and the size of their income. Women are also under pressure to spend more on their appearance, for their career as much as their social life (a 2010 study by the Queensland University of Technology found that blondes earned seven per cent more than other women, and another study in the American Economic Review suggested that women who wear make-up earn up to 30 per cent more than those who don’t). Women also tend to buy more gifts for friends and family.

Fair or not, such pressures mean that women may end up with a different view of money. We’d expect anyone in such a position to become more conscious of the need to save, to reduce risk, and to have emergency resources just in case. This doesn’t, however, mean that women are better at finance – any more than men are. As any financial adviser will tell you, too much aversion to risk can be as damaging in the long term as overconfidence. The more cautious approach that many women adopt may lead to them keeping more savings in ‘safe’ forms such as cash, while men take more chances and so potentially gain more rewards. Neither route is necessarily the right one – the answer lies somewhere in between.

So if you or your partner are considering going to see a financial adviser, it’s clearly best to go together. Just as companies with a gender-balanced board tend to outperform male-dominated rivals, so are the best financial plans created when they take into account the differing viewpoints and priorities of men and women. Consult your financial adviser as a couple, make sure that he or she gives you equal attention, and never let one person in the relationship do all the talking. Because let’s face it, ‘Yes, dear,’ is a terrible long-term strategy.

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