Men and Women Respond Differently to Debt

Basic economics assumes we're all rational actors, but the 2017 Nobel Prize on the subject went to someone who'd dedicated an entire career to irrationality. We don't always make the most obvious or logical decisions with our money, but we rarely think it has something to do with our gender. New research, however, shows that gender can have a big effect on how we respond to money issues.

Economists at American University have just released a study investigating how men and women deal with debt. Gender is a social construct, and the team seems to have operated under a narrow definition of the term, but broadly, they found that one stereotype doesn't hold at all. Rather than men being stolid and sensible about money, the researchers found that men were actually more likely to use debt to buy luxuries. Women, on the other hand, "view debt as a tool to help smooth consumption," according to co-author Mary Eschelbach Hansen.

In other words, women are more likely to tolerate debt when it's the product of using money responsibly, but men are less cautious, even when it comes to non-essentials and risk. This repeats a pattern we've already seen in investing, some part of which may even be hormonal. During the period the researchers studied (2004–2013), women's financial position actually improved in relation to men's, even though women were hit harder by the Great Recession. That's down to caution, according to the authors. Luckily for all of us, there's nothing gendered about learning to slow down and ask yourself why you're spending and whether it's the right choice at that time.