In an era of increasing financial complexity, who really calls the shots when it comes to investing your household’s savings? This question has significant implications for financial health and overall wellbeing.

As economists, we specifically wanted to understand how “bargaining power” is distributed between men and women in a mixed-sex household when it comes to finances. This bargaining power refers to the ability of one partner to influence decisions that affect the household – the partner with more bargaining power has a greater say.

To investigate this, my research partners and I analysed household investment decisions in Australia, Germany and the US. Our recent research reveals a persistent gender gap in household investment decisions, with men often wielding greater influence, even when their female partners may be more risk-averse.

This isn’t just a matter of who manages the online brokerage account – it has real consequences for families. In many households, partners have different levels of risk tolerance.

In Australia, this was the case for 43% of households, increasing to 57% in Germany and 65% in the US. This suggests that disagreements over investment decisions are common.

For example, a man might prefer high-risk, high-reward stocks, while his female partner prioritises safer, long-term investments. If the man dominates the decision-making, the family portfolio might be exposed to a level of risk the woman finds uncomfortable, potentially jeopardising their financial security.

But how do we measure this “bargaining power” within households? We developed an approach that goes beyond simply asking couples who makes the decisions. Instead, we looked at actual investment choices and combined this with data on individual risk tolerances. This allowed us to estimate how much each partner’s preferences influenced the final investment decisions.

Across all three countries, men tend to have more control over investment decisions than their female partners. In an average Australian household, the man’s bargaining power is 60%, compared to 40% for the woman.

In the US and Germany, men hold even greater sway, with their bargaining power rising to 61% and 69% respectively. While men’s greater bargaining power could be justified if they were better traders, evidence suggests they tend to trade more frequently and underperform compared to women.

This power imbalance stems from two main sources.

The first of these is individual characteristics. In our study, male partners are often older, more likely to be employed, and have higher incomes – factors that tend to increase their influence in financial decision-making. These characteristics can give male partners a sense of authority and control over financial matters, leading to an unequal balance of power in investment decisions.

Our study found that personality traits also play a part, with individuals who are less agreeable and less extroverted – typically more likely to be men – tending to have more bargaining power.

And the second is traditional gender norms. Typically, men tend to have extra bargaining power – this can be due to deeply rooted societal expectations about them being the primary breadwinners and financial decision-makers. This effect is amplified when women also adhere to these norms.

Of the two, we found that gender norms are a far more powerful force than individual characteristics in explaining the gender gap in bargaining power.

Why this matters

This gender gap in investment decision-making is closely linked to other household money matters, such as day-to-day spending and large purchases. Household investment and consumption decisions are highly correlated and usually made by the same person, with male partners often appearing to have the upper hand.

This imbalance can have significant implications for women’s financial wellbeing. Being exposed to higher investment risk than they are comfortable with can leave female partners feeling vulnerable and undermine their sense of financial security.

Our research provides evidence that supports the idea that gender inequality is not just a public issue but one that exists in private spaces as well. By showing that men often hold more bargaining power in discussions around investments, it underscores the need for policies that address gender disparities at home, not just in the workplace.

So, what can be done? Promoting gender equality in financial decision-making starts with open communication and recognising that both partners’ perspectives are valuable. Couples should discuss their financial goals, risk tolerance and investment strategies together, ensuring that both partners feel heard and understood.

Beyond individual households, challenging traditional gender norms is a crucial step towards creating a more equitable financial future for everyone. This isn’t just about fairness; it’s about ensuring that families make sound financial decisions that reflect the needs and preferences of all members. By empowering women to take an active role in investment decisions, we can help to create a more secure and equitable financial future for families everywhere.