Early Causes of Financial Disquiet and the Gender Gap in Financial Literacy: Evidence from College Students in the Southeastern United States

42 Pages Posted: 7 Mar 2020

See all articles by Abdullah A. Al-Bahrani

Abdullah A. Al-Bahrani

Northern Kentucky University - Department of Economics and Finance

Whitney Buser

affiliation not provided to SSRN

Darshak Patel

University of Kentucky - Gatton College of Business and Economics

Date Written: February 10, 2020

Abstract

Financial literacy, a cornerstone of family economic well-being, is surprisingly low in the United States. The literature has established that financial literacy is lower among women than among men. As sound financial decision-making among both male and female household heads is of paramount importance to well-being, we look to identify the underlying causes that may initiate and perpetuate this differential. We found that a gender-based gap in understanding develops by early college age, before individuals have had the opportunity to develop financial skills through experience or specialization in household roles. The literature indicates that women tend to underestimate their abilities relative to men, particularly in areas of math and financial decision-making. Math ability, financial confidence, and financial and math education have been found to enhance financial literacy, and so we focus on math self-efficacy as an early indicator of financial assurance and literacy. Using an ordered probit model and data from a sample of 529 college students across three institutions in the southeastern United States, we extend the current literature to find that for men, objective math ability drives financial literacy. For women, on the other hand self-efficacy — and not objective ability — is predictive of financial literacy. Understanding the underlying causes of the gender-based financial literacy gap can inform the creation of better education, family, and cultural intervention methods by which to close this gap in financial literacy, decisions, and outcomes.

Keywords: financial literacy, math, gender gap, confidence

JEL Classification: J16, G53, G41

Suggested Citation

Al-Bahrani, Abdullah A. and Buser, Whitney and Patel, Darshak, Early Causes of Financial Disquiet and the Gender Gap in Financial Literacy: Evidence from College Students in the Southeastern United States (February 10, 2020). Available at SSRN: https://ssrn.com/abstract=3535870 or http://dx.doi.org/10.2139/ssrn.3535870

Abdullah A. Al-Bahrani (Contact Author)

Northern Kentucky University - Department of Economics and Finance ( email )

College of Business
BEP 425
Highland Heights, KY 41099
United States

HOME PAGE: http://abdullahalbahrani.com

Whitney Buser

affiliation not provided to SSRN

Darshak Patel

University of Kentucky - Gatton College of Business and Economics ( email )

Economics Department
Lexington, KY 40506-0034
United States

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