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When my dad was 15 years old, he had to co-sign his name on my grandmother’s mortgage. Following her separation, the bank refused to let her sign for it. Despite her stable job and a significant downpayment on her home, a 15 year old high school student’s name was more valuable to the bank’s eyes because of his gender.
Many of the limiting beliefs women hold today around money directly or indirectly tie into the historically patriarchal approach to financial management. Of course, both men and women carry baggage surrounding money that leads to limiting beliefs. These originate from various sources, such as the behavior we would see from our parents around money and experiences we’ve had when we first started having our own money to spend.
That being said, women face the additional conditioning of the patriarchy’s historical influence surrounding all of the areas tied to financial literacy. This conditioning bleeds into how confident women feel today about managing their money, which can significantly limit their ability to build wealth and protect themselves. It’s precisely why it is so essential for you as a woman to work through your limiting beliefs around money. Having the confidence to make decisions about your finances is crucial for becoming financially independent and financially secure for your future.
Perhaps you think that my dad’s story is irrelevant as times have changed. While this specific story took place in the ’70s, he did have to repeat this process again in the ‘80s. Researching the history of the laws surrounding women’s financial inclusion was enlightening.
Specifically for our province of Quebec, where my dad grew up, it was in 1964 that the Married Women’s Property Act was signed. This Act amended the Civil Code to give married women the ability to sign a contract, open a bank account or take out a bank loan without requiring a husband’s signature. Apparently, as my grandmother’s experience shows, it took quite some time, over 20 years in fact, for the industry to follow through and implement significant legal reforms in actual practice.
Meanwhile, in the United States, it was in 1974 that the Equal Credit Opportunity Act was established. This Act would make it unlawful for creditors to discriminate against any applicant on the basis of various criteria, including gender. Then, it was only in 1988, the year I was born, that the Women’s Business Ownership Act of 1988 was signed by then-president Ronald Reagan, putting an end to, among other things, state laws that required women to have male relatives sign business loans.
Think about this: in the US only 33 years ago, if my mother had wanted a business loan, she would have needed to have her dad, husband, brother, or even a teenage son as a co-signer even if her finances indicated she was qualified. Basically, women’s access to the capital and support necessary to start a business was significantly limited without a male co-signer.
No wonder many women today are confronted with the limiting belief that it is not their place to talk about money. These limiting beliefs might come in many different forms, such as the thought that it may be impolite to talk about money, not knowing when is the right time to bring up salary negotiations in professional settings, or just general discomfort around financial conversations.
The Confidence Factor in the Financial Literacy Gender Gap
I bring up this history because it greatly matters how women think, feel, and act concerning managing their money today.
On International Women’s Day of this year in 2021, a paper entitled Fearless Woman: Financial Literacy and Stock Market Participation was published by Dr. Annamarie Lusardi, Professor of Economics and Accountancy at the George Washington University & co-authors. Based on several years of projects, the authors of this paper embarked on evaluating if the financial literacy gender gap reflects a lack of knowledge or rather a lack of confidence.
Another motivation behind the paper and its title is the Fearless Girl – a bronze statue of a girl which was placed in front of the Charging Bull on Wall Street a day before International Women’s Day in 2017. As explained in the 2021 paper: “Its symbolic placement sparked a debate about women’s roles, particularly in financial professions, and pointed to the importance of confidence, especially in the fields of finance and investing.”
The authors’ previous work, initially based on US data before moving on to international data, showed that everywhere and across socio-demographic characteristics, women rate lower in terms of financial literacy when compared to men. More striking is that women tend to disproportionately answer “I do not know” to financial questions.
As such, in this particular study, they removed the option of answering “I do not know.” Also, they added the criteria of the level of confidence the respondent has in their answers. These changes led to discovering that women tend to answer correctly despite not feeling as confident in their answers as men.
This lack of confidence could explain 1/3 of the gender gap. Meaning that one time out of three, women knew the correct answer yet did not feel confident about it. What’s more, a lack of confidence scares women away from the stock market, hampering their ability to build wealth. Moreover, the author’s past research has shown that the more people are financially literate, the more they save and the more they are able to protect themselves.
An Unconscious Bias A Gift From Patriarchy
Another interesting finding that the authors of this paper brought up in a podcast discussing their study and past work is that the financial literacy gap appears to form later on in life when financial decisions are relevant to a person’s wellbeing.
Indeed, at an early age, girls and boys have similar knowledge levels in terms of numeracy and mathematical skills, which are essential for financial knowledge. More research is needed to understand if the gap that grows later might result from a difference in preference and interest further amplified by an unconscious bias.
With what I highlighted above on the history of how women’s roles were significantly limited in terms of managing finances just three short decades ago, it is not hard to imagine how this unconscious bias tied to the patriarchy could have its share of responsibility in the lack of confidence of women in their financial knowledge.
Why It’s Important to Work Through Your Limiting Beliefs Around Money
We can learn from the study above that your limiting beliefs around money may have dire consequences on your financial future. These lead to fear and consequently cause you to hesitate to take action concerning your finances.
As such, you lose out on opportunities to learn and build up evidence to overcome those same limiting beliefs. This simple vicious cycle can have an exponential impact on the financial literacy gender gap as we tend to learn more when we take action.
Another crucial reason to regularly work through your limiting beliefs about money is that a lack of financial literacy may make you vulnerable to industry players who might not have your best interest at heart.
Indeed, financial literacy is linked to many behaviors, including the ability to save and to protect yourself. Ongoing awareness and improvement of financial literacy are all the more critical in times of crisis. We have lived in such a scenario over the past 18 months and have seen women exiting the labor market at an alarming rate.
I’m no exception to this as I’m currently on a sabbatical from my 9 to 5. However, like Kristin, who recently shared her experience of leaving the workforce during the pandemic, I was able to be strategic in my approach and do so without compromising my future financial goals.
Thanks to years of building up my financial knowledge and specifically being on the journey towards financial independence over the last several years, my sabbatical has become an opportunity to test if I can cover my cost of living through part-time entrepreneurship. Meanwhile, I could let my investments grow to reach my full financial independence number long before the traditional retirement age, thus ensuring my financial security in the long run.
Tying this back to the history of women and finances and the study mentioned above, I was able to increase my financial literacy throughout the years by having an active role in my financial life. I directly credit this at giving me options to adjust my circumstances to protect my long-term financial security while also taking care of the needs of my family and my own needs in the short term. Although my grandmother passed away in 2016, I’m sure she would have been darn proud to see the role I’ve played in taking control of my finances.
Overcome Your Limiting Beliefs Around Money to Take Control of Your Finances
In my opinion, the very first step to face your limiting beliefs about money is to have a clear picture of where you currently stand financially. I’ve created a free tool to guide you towards financial clarity and having a good idea of where you are starting from and what your average monthly budget may look like. Knowing where you are starting from is key to taking control of your finances.
Once you have this information in place, you can start thinking about your financial goals for the future. This step is likely to trigger your limiting beliefs around money. Don’t just skip over these. Set some time aside to implement strategies to overcome these beliefs.
Jessica from the blog The Fioneers recently wrote about 6 strategies to conquer your self-limiting beliefs, which you can apply to these limiting beliefs around money. One of these strategies includes building a supportive community.
When I reached out to the members of the WPF community to find out about their limiting beliefs surrounding finances, Nadina shared the following :
“I think my most limiting belief is that money just isn’t all that important to me. I mean, I am here, so obviously I realize its importance, but when I do my priority rankings in my head, it doesn’t rank. I always have to mentally exercise to make sure I am putting it in the rankings. It is part of the reason I joined these groups. This group helps me to remember that wanting security and being able to comfortably take care of ourselves later is important and deserves to be front and center all the time.”
This fabulous reflection is a true example of how Nadina has applied this strategy, with the help of the WPF Insiders community, to work on overcoming the limiting belief that money isn’t all that important to her. Having this space where women can discuss finances without fear of being judged (or, dare I say, mansplained) is crucial to increasing women’s comfort around managing their finances.
As you take action to play an active part in your finances, remember that the patriarchy might have a more significant role than meets the eye on your limiting beliefs around money. You have what it takes to break this cycle. It’s okay to be fearful, all the while knowing that fear is not helpful and that the only way through it is by doing.
As the author of the paper entitled Fearless Woman: Financial Literacy and Stock Market Participation concluded in her appearance on this podcast:
“In the same way we put [the Fearless Girl] statue in front of the stock exchange in NY, I would like every country to put a statue of their own girl in front of the stock exchange to remind women that these financial decisions are also important to them. They will benefit and society will benefit if they are more financially independent and financially secure for their future. “
Dr. Annamaria Lusardi
Mel Dorion is the blogger and creator of Modest Millionaires. She discovered FIRE early in her career & crafted a 10 year plan for her family to reach financial independence by 2025.
Over the last 5 years she started coaching individuals, couples and families to get unstuck and take control of their finances as a side-hustle. She fell in love with guiding others to their own financial independence.
In 2021, she made the decision to leave her career as a public servant and move to a Semi-Retired lifestyle which will allow her to reach her full financial independence in her early forties. She now runs her financial coaching business on a part-time basis, finding great joy in ensuring that her clients feel comfortable managing their finances in order to become financially independent & reach their goals.