Women and poor not as financially literate

Women and poor not as financially literate

WOMEN and the poor are not as well versed in basic financial concepts, according to a recently published global survey by Standard & Poor's on financial literacy. In Singapore, 67 per cent of men surveyed got three out of four topics in the survey correct, which is defined as the threshold for being financially literate.

Just 52 per cent of women did so. The 15 percentage point gap here was one of the largest in the world.

The gender gap in financial literacy has shown up before in smaller surveys across countries and earning power. In this survey, women fell behind men in 128 out of 143 countries. Possible explanations are that they have less confidence, or they had to take more time off to care for the family and have less earning power.

However, others have pointed out that lower confidence is not necessarily a bad thing as women, unlike men, know what they do not know.

"Research shows that women who hold stocks trade them less frequently than men, thereby paying fewer fees and transaction costs and ending up with more wealth. Women tend to hold more conservative portfolios; and in the current environment, this has worked out well," said economist Annamaria Lusardi of the George Washington University School of Business, in a 2009 blog post.

Meanwhile, 62 per cent of adults living in the top three-fifths of households in Singapore were financially literate, compared to 56 per cent of adults living in the bottom two-fifths of households.

The Standard & Poor's Ratings Services Global FinLit Survey, one of the largest such surveys ever done, was based on telephone and face-to-face interviews with more than 150,000 people aged 15 and over in over 140 economies around the world. The data was collected in 2014 by Gallup as part of the Gallup World Poll.

The results on financial literacy were released in mid-November. Five basic multiple choice questions were asked on four topics of risk diversification, inflation, interest and compound interest, where there were two questions. Two-thirds of Singapore adults surveyed got the questions on interest and compound interest correct.

One compound interest question was: "Suppose you had US$100 (S$141) in a savings account and the bank adds 10 per cent per year to the account. How much money would you have in the account after five years if you did not remove any money from the account?" (Answer: More than 150 dollars).

People here did worst, relatively, on the risk diversification question, where 55 per cent got it correct: "Suppose you have some money. Is it safer to put your money into one business or investment, or to put your money into multiple businesses or investments?" (Answer: Multiple businesses or investments).

Just one-third of adults in the world are financially literate. The proportion of financially literate adults range from 15 per cent and below in Afghanistan, Somalia and Yemen to 71 per cent in Norway, Denmark and Sweden.

Singapore scored 59 per cent. Financial literacy here declines among older age groups. Those aged 55 and above (56 per cent financially literate) fared slightly worse than those aged 15-34 (66 per cent financially literate).

Generally speaking, the survey found that financial literacy is higher among the wealthy, well educated and those who use financial services.

"Financial knowledge is especially important in times where increasingly complex financial products are easily available to a wide range of the population," the report said.


This article was first published on November 30, 2015.
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