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Women trail men in financial literacy

When it comes to money, women suffer from more than from a gender gap in pay.

Women in several countries are flunking the basics when it comes to financial literacy, according to new research from George Washington University professor Annamaria Lusardi, an expert on financial literacy, and colleagues at other institutions.

The troubling findings come at a time when the gender pay gap is increasingly a matter for debate, given that women earn about 78 cents for each dollar earned by men. That sets up many women for trouble when retirement beckons, given that industry estimates show they enter their golden years with an annual median retirement income that's $11,000 below that of men in the same demographic group.

"Enhancing the financial knowledge of women and equipping them with the tools to make sound financial decisions should be a top priority for policymakers," the authors noted.

So how bad is the financial literacy gap? It's fairly severe and widespread, according to the paper, which focused on the gap between the genders in American, Holland and Germany.

"Not only are female respondents less likely to answer financial literacy questions correctly, but they are also more likely to state that they do not know the answers to the questions" in all three countries, the researchers said. Even after taking into account marital status, education and income, the gap still existed.

The group asked men and women three basic financial questions about interest rates, inflation and the stock market. (The questions are below, if you wish to test your own knowledge.)

While 38 percent of men correctly answered all three questions, only 22 percent of women were able to do so. Women were also more likely to say they didn't know the answers, the researchers found.

To be sure, the literacy quiz is only asking about three topics, providing a limited canvas on which to base draw conclusion. And women are also less likely to express confidence in their answers than men, a widely recognized phenomenon that has bedeviled pollsters. Evidence suggests that women require a higher confidence in their knowledge than men before they'll answer questions (yes, this may provide an explanation for "mansplaining.")

On top of that, it's not exactly as if men are doing gangbusters on their financial literacy, either. With fewer than 4 in 10 men able to answer the three financial-literacy questions correctly, it means the male gender is also flunking out.

Still, given the fact that women are more likely to take breaks in their careers to become caregivers, as well as earn less than men in general, improving financial literacy can only help. Women, after all, typically live longer than men, meaning they need more financial resources than men to make their retirement years comfortable.

Below are the financial-literacy questions:

1) Suppose you had $100 in a savings account and the interest rate was 2 percent per year. After 5 years, how much do you think you would have in the account if you left the money to grow? A. More than $102; B. Exactly $102; C. Less than $102; D. Do not know; Refuse to answer.

2) Imagine that the interest rate on your savings account was 1 percent per year and inflation was 2 percent per year. After 1 year, how much would you be able to buy with the money in this account? A. More than today; B. Exactly the same; C. Less than today; D. Do not know; Refuse to answer.

3) Please tell me whether this statement is true or false. "Buying a single company's stock usually provides a safer return than a stock mutual fund." A. True; B. False; C. Do not know; Refuse to answer.

(Correct answers are: 1-A; 2-C; 3-B.)

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