Vanguard’s most recent study, How Australia Retires, reports that the majority of women are less optimistic about their financial decision-making capabilities when compared to their male counterparts.
The study, which surveyed more than 1800 working and retired Australians, highlights a noticeable lack of confidence among women concerning their financial abilities.
While 50 per cent of male respondents felt ‘very’ or ‘extremely’ confident about making financial decisions, only 33 per cent of females felt the same.
At the other extreme, 23 per cent of women felt ‘slightly’ or ‘not at all confident’ about their financial decision-making. While only 11 per cent of men shared these concerns.
The data also shows that women tend to be less confident when it comes to understanding investment products and services. Almost half of the women (47 per cent) admitted they were ‘not confident’ in understanding stocks, and a significant 64 per cent felt the same way about bonds.
One-fifth of female respondents were ‘not at all confident’ in understanding superannuation. While just 8 per cent of men felt the same.
“Many studies including Vanguard’s own investor data show that women are typically very disciplined investors. They are less likely than men to take on too much risk and tend to maintain a long-term view rather than engage in trading behaviours to score a quick return,” said Shannon Nutter, executive consultant at Vanguard.
“These traits are considerable strengths that can enable women to take charge of their own financial lives.”
Ms Nutter acknowledged the extensive range of factors contributing to women’s unequal footing in terms of retirement preparedness.
Why women lack confidence about their financial abilities
Socioeconomic factors
On average, Australian women earn 13 per cent less than their male counterparts, often working in industries with lower wages. This wage gap results in women having fewer financial resources to manage and invest. This can lead to lower confidence in their financial decision-making abilities.
Furthermore, women are more likely to take on caregiving roles within their families. These responsibilities may cause interruptions in their professional lives, resulting in reduced income and opportunities for financial growth. Women also generally have longer lifespans.
Risk aversion
Some experimental studies and surveys have shown that women display more risk-averse behaviour than men. Including when it comes to investing and financial decision-making. While risk aversion can be a prudent strategy, it can also lead to missed opportunities for financial growth. This cautious approach can contribute to lower financial confidence.
Of course, risk aversion is not inherently a negative trait. However, women should be encouraged to strike a balance between risk and reward, and to seek advice from financial professionals to help them navigate investment decisions confidently.
Lack of representation
The underrepresentation of women in key financial roles, such as financial advisers, investment managers and corporate leadership positions, can contribute to the gender gap in financial confidence. When women do not see themselves represented in these roles, they may question their own abilities and feel less confident in seeking financial guidance from professionals.
All these factors collectively mean that women need to save or invest more to secure a comfortable retirement.
Retirement confidence
Vanguard suggests that retirement confidence is strongly linked to having a purposeful plan of action. This includes seeing a financial adviser, having a detailed plan and making extra superannuation contributions on a regularly.
The How Australia Retires study revealed that nearly 46 per cent of women ‘had no plan’ or ‘did not know what they needed for retirement’. Whereas 73 per cent of men expressed having a ‘general’, ‘good’ or ‘exact plan’ for how they will financially prepare to reach the retirement lifestyle they want.
“We all need to take ownership of our financial futures and take actions that will help us retire the way we envision. This might mean women, whether single or partnered, take time to understand the different aspects that contribute to retirement.
“For instance, being aware of their household finances, getting smart about debt, planning and seeking advice, investing regularly, making additional contributions to super and getting comfortable with negotiating better compensation,” said Ms Nutter.
A majority of pre-retirees have never consulted a financial adviser. This figure was higher, at 70 per cent, particularly for women compared to 56 per cent for men.
“This analysis has highlighted the areas in which the industry can provide for female clients to ensure everyone, equally, can move more confidently towards a great retirement,” said Ms Nutter.
How confident do you feel when making financial decisions? Would you like to feel more confident when it comes to money and retirement? Let us know in the comments section below.
Also read: Three life lessons for investing
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