Why men still dominate wealthy households’ financial decisions

A study by Ohio State University found this to be true across demographics but clearer in wealthier households

Why men still dominate wealthy households’ financial decisions
Steve Randall

Women are becoming wealthier and are increasingly taking control of their finances but a gender gap still exists in mixed households.

A recent study by Ohio State University found that men are generally more likely to lead financial decision making in mixed-sex households, especially in wealthier ones.

The study used data from a US consumer finances study, conducted every four years, and found the share of households where men were considered “more knowledgeable about household finances” increased from 49% in 1995 to 56% in the most recently-included year (2016).

But among the top 1% of households by wealth, men were considered more knowledgeable in 90% of responses.

"Despite the progress women have made in society, there still seems to be a gender gap in who takes care of the finances, especially in wealthy households," said Sherman Hanna, lead author of the study and professor of consumer sciences at The Ohio State University.

Age had little to do with the results but the more educated spouse was more likely to be considered the financial lead.

Interestingly, the stats show that it is not income that affects the likelihood of the man being considered more knowledgeable, but the value of assets.

This may explain why men come out top in wealthier households, where wealth is more likely to be tied to assets such as business, investment real estate, and stocks and bonds.

"These things generally mean taking big risks, and research suggests men are generally more comfortable than women with risky choices," Hanna said. "In addition, studies show that men generally have more financial confidence than women."

Even in households with negative wealth, husbands were seen as more knowledgeable about finances.

"These may be cases where the risks that the husbands took did not pay off and actually put them in debt," Hanna said.

FAs should work with women

The authors of the study, recently published in the journal Financial Planning Review, conclude that it’s important for financial advisors to work with wives as well as husbands.

"Our results suggest many of these wives may not know enough about their household finances, which may be critical if they are ever widowed or divorced,” said study co-author Kyoung Tae Kim, associate professor of consumer sciences at the University of Alabama.