Canadian Gender Gap in Financial Literacy: Confidence Matters

We construct a financial literacy index as well as a financial confidence index in order to evaluate the effect of confidence on financial literacy, and more specifically, on the gender gap in financial literacy. Results confirm the existence of a gender gap in financial literacy in Canada, and show that having a higher confidence in one’s financial skills and knowledge is indeed a factor that increases one’s financial literacy. Financial confidence is found not to track actual financial skills very closely through ages, especially for women, and at older ages. We also find evidence that financial literacy and decision making are related to the relative education level of spouses. Using the Oaxaca-Blinder decomposition, confidence is also found to explain 14.15% of the gender gap in financial literacy, while being self-employed explains 19% of the gap, and taking part in the financial planning accounts for 16.76% of the gender gap difference. We find that most of the gap remains unexplained by differences in coefficients of men and women.