Women and Money Myths: Are Women More Risk-Averse Than Men?

Women and Money Myths: Are Women More Risk-Averse Than Men?

Just what is a myth? The dictionary tells us they are traditional stories. If you dig a bit deeper, you’ll find they actually have a set purpose to perpetuate a particular worldview. They “embody the ideals and institutions of a society.” Alternatively, the word ‘myth’ means a widely held but false idea.

Traditional stories tell us about the past, but they also help shape our future. And what happens when those stories are false? This blog series is taking a look at some of the myths about women and their money. By showing that these myths perpetuate falsehoods, it is my hope to truly empower women to live their best financial lives.

Let’s look at a myth that is particularly illustrative of the power of bias towards women. Are women more risk-averse than men? Absolutely not. But the reason why might surprise you.

Women Don’t Like Taking Risks. Right?

I’ve got to admit – I’ve heard this so many times that I believed it to be true as well. This traditional story is well embedded, especially in the financial world, and it takes some unlearning.

When it comes to investing, women are said to be more risk-averse than men. In fact, that’s not just limited to finance. In the entrepreneurial world of start-up businesses, if a woman even dares to pitch an idea, the start-up is far less likely to receive any investments. In fact, pitches given by men are more than twice as likely to be successful in securing funding than women. Women are often kept out of more senior and powerful job roles, just because they are not believed to be as daring and gutsy as male counterparts.

But how did we arrive here? And why is this myth still perpetuated?

We’ve Been Looking At It All Wrong

I think I find this one of the most interesting of the myths. Unraveling it reveals some fascinating truths about women and their financial lives. It also shows just how skewed perceptions of women can be, and how these stories are continuing to be supported.

A significant number of studies have been done that show women to be more risk-averse than men. And it seemed to make sense. Women have been traditionally thought of meeker and milder, less inclined to be thrill-seeking. Men are the adrenaline junkies, right?

According to social scientists at the University of Melbourne, this is not correct. The authors concluded that judging women’s propensity to take risks by assessing their likelihood of taking risks in traditionally male dominated areas leads to an erroneous conclusion. For example, it’s like saying a dolphin is less skilled than a chimpanzee, if the only thing you measure is the ability to ride a bike. Women’s risk taking has only been considered in “masculine-coded” areas such as gambling and extreme sports. But these are activities in which women are less likely to participate.

The scientists realized that if you remove gender bias from the equation and look at more gender-neutral activities, then the willingness to take risks is equal between men and women. In short, female risk taking behavior has been minimized because we’ve been judging women based on a male paradigm of risk.

Women, Investing and Risk

When it comes to money, the financial world is still largely dominated by men. It’s an arena that women are only just beginning to enter. Don’t forget, in older generations of our communities, women still were far less likely to have a career and be in control of their household’s finances. And we’ve still got a long way to go.

So if we’ve been largely absent from the financial world up until now, of course we are being misrepresented in studies about risk-taking. Women are investing less than men are, so inevitably that makes it appear like women are more risk-averse. But women also have different objectives when they invest than men. They aren’t after the thrill of the big win; they want the long-term security of a steady and safer investment.

Women are also more likely to be aware of risks and evaluate whether a certain investment will likely be successful. Apparently, this behavior goes right back to childhood and how we teach girls and boys to play differently.

Are Women More Risk-Averse than Men Because of Income Inequality?

Other studies have shown that higher wealth or income increases the willingness to take risks in both genders. It’s OK to risk some money, when you know you’ll be alright if you lose out, right? Historically, women just haven’t had this kind of financial security.

But women who are higher earners are equally likely to take financial risks as men. Not only that, but knowledge plays a role too. When women are equipped with equal financial knowledge to men, they will accept similar – if not greater – risk. Unfortunately, women underestimate their abilities when it comes to finance while men overestimate their abilities!

So when we ask the question, “Are women more risk-averse than men?”, we need to look at a whole range of social and economic factors. When gender neutral risky behaviors are considered along with equal financial security to men, you’ll find women are not as risk-averse as we’ve been led to believe.

Women and their Financial Truths

I am passionate about helping women work through these money myths that affect their confidence. Women blossom and grow with their newfound command of their financial lives when they are no longer bound to the biased views that have been perpetuated for so long. A woman’s wealth is her tool to live the life she wants based on her values.

Women are excellent investors and are very capable when it comes to managing their resources. They don’t have to be timid wallflowers in the financial world anymore. If you’d like to know more about why we specialize in helping women with wealth management and planning, or if you would like some help in realigning your finances to reflect your values, please don’t hesitate to get in touch.


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