Five differences between women and men and their effects on our relationship with money

Mr Darcy and me :)
Mr Darcy and me 🙂

Today is the International Women’s Day and although we are not very big in celebrating it in the UK – we have shifted our celebrating to the much more politically neutral and commercially expedient Mother’s Day – I want to mark it. After all I am from Bulgaria where people really believe that ‘men are the head of the family but women are the neck’ and celebrating women and their strength is important. Every 8th of March Bulgarian women get flowers from husbands, lovers and children.

International Women’s Day started as a socialist event to promote equal rights for women, including the right to vote. A century later most women on the planet vote, most women have access to labour markets but we still earn only 10% of the world’s income and own less than 1% of the world’s property. This is despite the fact that women a becoming more and more prosperous in the Western world; this is not ‘the world’ right? Is there anything specific about women and money?

This made me think about key differences between the way in which men and women relate to money. I believe that apart from the layers of cultural conditioning the different ways in which men and women relate to women boil down to the following:

1.      Women are inherently more conservative than men

It is a truism that because of the evolutionary function of women, to give birth to and socialise the next generation, we are the carriers of continuity and stability. Even biologically, variation comes from the male. For our relationships with money, this inherent conservatism means that:

  • Women are more likely to save rather than invest; and
  • Women are more likely, in times of crisis, to reduce their spending than look to increase their income

2.      Women value attachment, men value performance

Psychologists have long been fascinated with the different ways in which women and men operate at emotional level and the ways in which this affects the relationships between them. They generally agree that the core fear of most men is that they will be rejected because of failure to perform; women fear most emotional and physical abandonment. This is why:

  • Women are more likely to spend on others;
  • Women are more likely to lend to friends and family;
  • Women limit their earning by reacting emotionally to performance measurement systems rather than thinking ‘well, I’ll know how I perform’.

3.      Women access the world through emotion, men through reason

We see this in our everyday life and interactions. It is usually more likely that a man will go for a technocratic solution to a problem without account of the human costs involved. Analysis of Myers Briggs personality type tests also suggests that whilst 70% of the women are feelers, over 60% of men are thinkers  (this has nothing to do with intelligence but is about how people resolve situations and take decisions). The differences are large enough to be significant. What does this means for our relationship with money?

  • Women are likely to get emotional about money and changes are ‘upsetting’ or ‘uplifting’; it takes time to get to this being a problem, a puzzle that needs solving;
  • Women are likely to get emotionally attached to different aspects of finance: loyal to their bank, buying and/or keeping stock etc.;
  • Women are likely to stay in a job because of emotional attachment;
  • Women are likely to choose their career through emotion.

4.      Women thrive in networks, men flourish in hierarchies

This is a bit of a composite category including some of the differences discussed above. This also includes the female preference for cooperation versus men’s preference for competition. This mainly affects the kind of occupations, and respectively the earning power, of women. It also is an outlet to the ‘goodness of fit’ between gender pre-dispositions and the way in which the economy at large is structured.

5.      Women want to be wealthy, men want to be rich

We discussed the intricacies of being rich and being wealthy in a previous post. In a nutshell how ‘rich’ one is, is measured by material possessions – in fact recently the Financial Samurai published a post trying to establish the level of income at which one can be considered ‘rich’. Being wealthy, on the other hand, is a combination between material possessions and positive mentality.

These differences have to be taken with a pinch of salt: they are not absolute and there are probably women who thrive in hierarchies take risks and are thinkers rather than feelers. I know I am one (my Myers Briggs type is ENTJ – the type of Margaret Thatcher, Napoleon and other interesting people; thank goodness it is not very widely spread). What I was thinking is prevalence of tendencies that go beyond the empirical differences between the economic, financial and consumer behaviour of women and men.

What am I missing? Please add any differences that you can think of or have read about.

Oh, and belated Chestita Baba Marta!

23 thoughts on “Five differences between women and men and their effects on our relationship with money”

  1. We are thinking alike today 🙂

    I agree with most of the differences. The last one is what partially disagree but that is only because of my husband. He simply doesn’t care about money, but again, I already know that is a weirdo, umm.. exception :). You pretty much hit every difference. The only comment I want to add is on #1. I wanted to write on this topic last year and took notes by visiting all the women bloggers vs male bloggers. As you mentioned, most of the women bloggers talked about coupon, frugality & savings. Men talked about those too, but they also talked about investing and stuff in detail. I was thinking about the reason and studies does support that women prefer savings whereas men prefer investing based on the risk tolerance. But I also wondered whether it was due to women usually focusing on general nurturing and making everyday life comfortable (as they take a keen interest in budgeting) vs men feel the need to provide now and accumulate wealth to provide them for the future? I am stereotyping here and didn’t pursue it further. Do you think savings/budgeting vs investing focus is only because of the risk tolerance or more than that?

    1. @Suba: Wow! Now thank you for this comment – the begining, I hope, of a fruitful discussion and some great outcomes.

      1) ‘Wealthy’ or ‘rich’: honestly, John is rather strange like that as well; he developed a desire to be wealthy. Yes, you are right; many people are not interested in money and possessions and they are men and women. But when they are, I suspect that the difference will work.

      2) It is very likely that this is much more complex and there are a number of ‘nested’ factors at play. Including the cultural ones that are difficult to capture in a blog post (like women get the message that they will be ‘looked after’, they don’t educate themselves about the broader workings of money, they save from instinct (savings) rather than see it as putting their money to work). What you suggest is interesting except that, I believe, that women focus on a much more long distance future (this is probably why we worry and it). Men had to learn to be more present – if you are not present in battle you die.

      This most certainly needs another look – and of course if we are right about the differences, we can start matching these with the fundamental principles of the economy asking the question whether it is changing to favour more ‘faminine’ characteristics. 😀

    2. I am an ENFJ….

      but on a side note. I believe that most women do not want to make the trade off between having the corner office and no family time. Women can have the corner office…it is not as important as relationships.

      1. @Super Frufalette: This is exactly why I believe that policies aiming to increase the proportion of women at top management and leadership positions are doomed (we are just adoption one in Europe, at the level of the European Union). The trick is to change the rules of the economy so that one doesn’t have to choose between the ‘corner office’ and time with their family.

  2. One of my social groups had a female financial adviser come speak with us a few weeks ago – she gave us a quiz about women investing, and I learned that women not only make more EDUCATED financial decisions, but make fewer MISTAKES as well. Female empowerment, woo hoo!

    1. @Elizabeth: Yep! Confirms my guess about the role of risk aversion. Proportionately fewer women will invest but the ones that do will make sure to increase the level of certainty. So they will research, learn and choose conservatively.

      One interesting measure will be how do cumulative gains from investments (particualrly shares) compare between men and women? Normalised, of course.

    1. @Jai: I am a ‘thinker’ – this things are never clear cut. This is why in my ‘serious’ work I prefer to think about psychological types rather than men and women. Femininity and masculinity always map on a continuum.

  3. I think it is very important to value the contribution of both sexes to financial well-being. For example, God forbid that someone only saves and never invests unless he or she makes a “gazillion” dollars. Interestingly, a newish book suggests Warren Buffet invests like a girl. At ~$48 billion, I would takes some of that in a heartbeat.

    1. @Roshawan: Completely agree although this may be hard to achieve in practice – people tend to act on the basis of their preferences (it is another matter how these were established). As women saving rather than investing, there are arguments that this is one of the major reasons why women are relatively less wealthy generally and when they get older in particular.

      I would like the reference to this book please!

  4. You and Suba are on the same track-and for an intersting topic. Many of the things you write seem to be true in my observation. Your response to our emoitional Jai is also accurate in my opinion. All the lines blur when you look at an individual.

    1. @Dr. Dean: Thanks! Yep, the fact that on average thirty people out of hundred do (or don’t) something doesn’t mean that the individual will. One of the limitations of statistics and correlations; very different from cases and causality.

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