Men are Better Savers, Women are Better InvestorsJuly 12, 2008
Women are better investors than men. I’ve written about this topic previously in this blog, and I’ve also provided material to media outlets that have issues of gender and finance as one of the primary focuses of their communication.
But the story of men, women and money is much more complicated than one blog post or short article. And I want to briefly address another piece of the puzzle today. Yes, women are better investors, but they are also “worse” spenders in sense that they are more likely to be spendthrifts than men. That is one conclusion of a recently published paper, “Tightwads and Spendthrifts”, but the kernel of this particular result has been known at a practical level to marketers for quite some time. Women are better at, and enjoy, shopping more than men because of an evolutionary propensity to remember where objects are located, or are hidden. This is particularly true in the case of food. In early societies men hunted, and developed skills (physical strength, spacial geometry) that helped them in their daily activities as hunters. Women gathered — food mostly. They are better at it today because their own and their offprings’ survival depended on this skill for thousands of years.
But much like men’s hunting instincts help make them inferior investors to women, women’s gathering instincts can wreck the budget as well. They are good at shopping and so they enjoy it. And enjoying shopping too much….well we all know where that leads.
So how does this knowledge lead to practical advice for household finance. Well, current research certainly suggests that for couples, in more cases than not, it would be better for men to handle the day-to-day budgets and then once money is set aside as savings for women to do the investing. The interesting part of this advice is that it runs counter to what I, and I suspect many of us, have observed is the case with married couples that we know (women set the budget, men invest the savings). These more traditional roles appear to be at odds with healthy household finances.