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.
Publication authors: Raquel Fonseca and Simon Lord