POINT OF VIEW
IN THE LATE 1970S, are search team out of Maryland’s National Institutes of Health released the Five Factor Model of personality, theorizing that most human character traits can be described using five dimensions: Agreeableness, conscientiousness, Neuroticism, Openness, and Extraversion. Nearly 50 years later, tests that assess these ‘Big Five’ personality traits are considered reliable and are widely used by psychologists around the world.
More recent research indicates that of the Big Five traits, conscientiousness may be the best predictor of success. In a variety of studies, people who test high in Conscientiousness have higher incomes and job satisfaction, and research indicates that this trait is an important factor for finding and retaining employment. The benefits extend beyond the workplace: Highly conscientious people commit fewer crimes, have fewer strokes, lower blood pressure and a lower incidence of Alzheimer’s disease.
Among their habits, conscientious people tend to be highly organized, self-disciplined, and plan ahead. They have also been shown to be good at setting and working towards goals and to be persistent amid setbacks. Taken together, the evidence indicates that conscientious people have what it takes when it comes to setting and meeting personal financial goals. And it turns out, women might have an edge on men in this regard.
In our TD Wealth Behavioural Finance Industry Report Exploring Wealth Personality, we showed that, on average, Canadian women are significantly more conscientious than men: 46 per cent tested high on this important factor, versus 39 per cent of men. Nevertheless, women lack financial confidence: only 31 per cent consider themselves to be ‘financially knowledgeable’.
I myself once personified this paradox. When I first joined TD ten years ago from the consumer packaged goods industry, I was asked about my thoughts on the issue of women and investing. My answer: “I’m smart and I have a successful career, but I just don’t prioritize learning more about finance. I feel embarrassed to ask my advisor for help because I feel like I should know about this already.” I anticipate that many women feel the same.
The fact of the matter is this: 90 per cent of women will play the role of sole financial decision maker at some point in their lives, but many lack the confidence to fully embrace the role. Fortunately, the news isn’t all glum: 92 per cent of women want to learn more about financial planning and 83 per cent want to get more involved in their finances.
If the research shows that women have the inherent personality required to successfully manage their financial planning, then why are we less likely than men to have the confidence to do so?
It may have something to do with the fact that in our study, women also scored higher than men on the Agreeableness dimension of the Five Factor Model: 31 per cent scored high versus 16 per cent of men. On average, women value social harmony more so than ‘stirring the pot’ by asking questions. This desire to not ‘rock the boat’ may lead to making decisions without feeling totally comfortable about them.
According to our research, women lag behind not only in financial confidence and also in actual financial literacy. Only 10 per cent of women in our study stated that they were ‘extremely knowledgeable’ about finance, trailing men at 18 per cent. Additionally and not surprisingly, as the conscientiousness scores of women increased, so did their confidence in their overall financial knowledge.
In addition, our study demonstrated that single women behave differently than women who are married with children. For instance, a woman married with kids was 28 per