Sex & money

2014-01-16 11:00

Are men and women on different planets when it comes to money?

A new field of study – behavioural finance – has the answer

It’s a fact: In money matters, men and women don’t think the same way.

This is what behavioural finance – a relatively new field that combines economics and psychology – states, based on research that shows the difference between the sexes’ finances.

In fact, one of the findings of behavioural finance is that men and women invest their money differently.

This is valuable information, because the better you understand yourself, the better your decisions and choices regarding your hard-earned cash will be.

When your decisions are coloured by emotion, they could be hopelessly wrong, which means bad investments.

And any discussion of investment starts with risk.

Taking risks

Women are much more cautious when it comes to taking financial risks, while men are more inclined to rush in.

In other words, men are usually more comfortable with taking risks with their investment portfolios than women.

The result cuts two ways: Men frequently take risks they shouldn’t, while women avoid risks where they could have been a little more daring.

In this way men are more inclined to be talked into promises of high returns – and will take the chance – while women get stuck with an investment portfolio that simply can’t beat inflation in the long term.

Either way, your money shrinks rather than grows.

Men overestimate their abilities

Men want to make things happen – and sometimes overestimate their inherent abilities to do so.

It may be part of the human will to survive, but when it comes to investments, men think they know better than the rest of the market.

It’s a proven fact that only a very small percentage of active traders (those guys who buy and sell shares or hop between investment funds) fare better than the market.

They believe they can fool the market, and despite the statistics some still try it every day.

Men are much more inclined to rely on their own abilities, to the disadvantage of their portfolio’s performance in the longer term. The point? They get poorer...

Women stick better to long-term plans

Women are more disciplined with investment and financial planning.

They are also more focused on saving for goals. And they stick to their saving plans.

If the plan is to put aside a certain amount every month or to use only income (and not capital), women stick to the rules better than men.

Women are less involved

Women are usually less involved in household investment decisions.

Although more than 80% of all household spending is done by women, they don’t make the majority of investment decisions.

But consider England, where nowadays there are more female than male millionaires. The playing field is definitely changing.

And don’t think women prefer being less involved in household finances or are happy to leave all the decisions to the man of the house.

Surveys show that while women are generally comfortable with leaving the eventual management of household investments to men, they still want to be involved in the initial financial decisions.

Also keep in mind that women live longer than men, so in their later years they will be dependent on such investments and would most likely have to manage them alone.

In love – and financially lost?

You’re truly, madly, deeply in love and who cares about tomorrow? All you need is the air that you breathe... and love. Sadly, not.

(Be warned: the following is not romantic at all – and can even lead to a row!) Before you get involved in a serious relationship, ask these four financial questions:

1. How do you both feel about drawing up and sticking to a budget – what do you regard as luxuries and what are necessities?

2. What are your views on debt and interest – is there a difference between ‘good’ debt (such as a bond on a house) and ‘bad’ debt (store cards)? Are you going to get into debt for stuff you want right now, or will you rather save up and buy cash later?

3. Do you both believe in long-term planning which will determine how much you’ll save up for children and their education – and that overseas trip you’re dreaming of?

4. When will you start saving for your golden years – and are you prepared to make some sacrifices now (we’ll dine out only once a month so one day we can dine out in Paris or New York)?

So if men and women think so differently about money matters, what to do?

Be aware of the differences and that neither of you are necessarily right or wrong – people differ, also when it comes to money and how we feel about it.

For women Beware – the inclination to avoid risk can cost you, especially if it’s about long-term growth and an investment portfolio that can beat inflation.

For men Beware – you overestimate your abilities and believe you can make better decisions than the rest of us. Get your head out of the clouds or you could lose money.

For couples Accept your differences and rely on women’s ability to stick to plans and be disciplined, and on men’s greater confidence in terms of risk and the management thereof.

Write down your goals and plans and agree on the best way to achieve them. Do this together so you both understand exactly what it’s about.

When unforeseen things happen, you need to know what your financial position is. Because men usually manage the household investments and women are less involved, remember to make sure you both know what the state of the portfolio is and who to discuss it with in case of emergency.

Did you know?

The term behavioural finance became popular when Daniel Kahneman, a professor in psychology at Yale University, won the 2002 Nobel Prize for Economic Sciences for his work in prospect theory, which describes the way people choose between probabilistic alternatives that involve risk.

Do you have financial courage?

Complete the online risk tolerance questionnaire at It will help you to:

• understand your financial risk profile better

• understand your partner’s financial risk profile better.

You’ll answer a series of questions and will then receive an analysis of your risk profile. Also visit for a personal risk profile.

BONUS! Five lucky iMagazine readers who complete their risk profile on will each receive a free copy of Warren Ingram’s book Become your own Financial Advisor.

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