Recent research has found that even though women don’t earn more than men, their investment capabilities are higher than men. An international study on women’s investment competencies has found that several reasons are the foundation of this result.
Research on financial literacy between the genders has found why women tend to score lower when it comes to tests on financial matters. They saw that women score lower because they tend to believe their financial literacy skills aren’t sufficient. When they have the opportunity to answer with ‘’I don’t know’’, they prefer to choose this option. However, when women were not presented with a choice to avoid answering, they were more likely than men to give the correct answer.
Confidence plays a significant role in this. When women doubt their capabilities, they tend to lower their scores for skills others think they do well. This tends to happen in other areas of a woman’s professional life, like when women have to rate their technical knowledge.
Research by Harvard has found a similar phenomenon. When women were asked to rate their technical skills, they placed themselves poorly. However, everybody around them rated their technical knowledge as sufficient.
So what happens when the results, rather than perspectives on women’s investment capabilities, are researched? Fidelity, an American investment platform, has found that women are better investors by 40 basis points or 0.4 percent. It has been found that women research their investments better, make financial plans to achieve goals, and reach out to financial professionals to gain advice. In addition, women tend to choose sustainable investments. This also makes them more responsible investors.
However, this also illustrates that women’s perception of their financial literacy is inaccurate. And this finding should not be taken lightly. High confidence levels are the basis of many skills that are crucial for successful leadership, like self-promotion, negotiating, networking, and visibly demonstrating leadership. In all of these fields, the problem of low confidence levels amongst women affects their chances of success.
And so it’s no surprise that even though women are excellent when it comes to investments, they still view themselves as CFOs of household spending but not as investors with a long-term vision. Women’s self-perception is not always indicative of their potential to succeed.
And in the workplace, this could mean they don’t negotiate higher salaries or volunteer for challenging projects or promotions. This means it’s essential that their environment provides support to empower women.
So what could help women overcome the barrier of a negative self-image? Firstly, it would be impactful to empower a growth mindset, which is the idea that success means trying new things all the time and learning from failures. In addition, women should work on beating imposter syndrome, which is the false belief that your success is accidental.
About 75 percent of women suffer from this psychological phenomenon, and it’s been concluded that imposter syndrome is a significant factor in weakening women’s confidence. Some helpful tips women could consider to build more confidence in finances is to be consistent by investing a part of each paycheck. Another way of empowering women as investors is by starting early (in childhood) with increasing financial literacy. Finally, women could seek extra education on increasing confidence levels and investments.
While tremendous progress has been made in women’s empowerment, we still have a long way to go. But one thing that’s for sure is that the next investor you attract to your company should be a woman!