Our emotional relationship with money is
complex and confounding.
Driven by beliefs shaped in our childhood and largely subconscious, our attitudes to money and our associated behaviours are possibly the single biggest determinant of our financial – and mental – wellbeing.
Negative money attitudes, when combined with our tendencies to succumb to cognitive biases when decision making, can sabotage our happiness, by placing enormous obstacles in the way of us achieving our career, relationship, and lifestyle goals.
Financial advisers are ideally placed to help their clients achieve more positive relationships with money, not by helping them acquire more of it (although that is usually an outcome), but by fundamentally reshaping their money attitudes and behaviours, and giving them a framework within which they can make better financial decisions. Further emotional benefits also accrue to advice clients from the advice proves itself, which reinforces a sense of achievement and progress towards goals.
This reimagined role for advisers in coaching better money behaviours – which is already starting to play out in the market in response to consumer demand – has significant implications for adviser training and advice processes. More importantly, and more excitingly, this new perspective on how advisers create value for their clients implies:
01
A much broader target audience for the advice proposition
02
Advice relationships which start younger and last longer; and
03
Fees which are unlinked from traditional product solutions, and which are charged more confidently by advisers and paid more willingly by consumers
Money makes us anxious
The relationship between our finances and our stress levels is both intuitive and borne out across an extensive body of research.
According to one survey of Australian adults1 , around one quarter reported moderate to extremely severe depressive symptoms. And across the community, personal financial issues are the biggest driver of stress, cited by 49% of respondents.
Financial issues can kill our relationships too. According to Relationships Australia, 7 out of 10 couples report that money causes tension in their relationships, and disagreement over finances is a stronger predictor of divorce than other commonly cited causes of marital disagreements2 .
Disturbingly, these results probably still understate the extent to which are most common money emotions are negative.
When psychologist Adrian Furnham3 , studied the emotions people had associated with money over the prior 12 months, the top 4 in ranked order were Anxiety, Depression, Anger and Helplessness. Indeed, 8 of the top 10 ranked emotions were all negative, as shown in Table 1.
Table 1 Top 10 emotions associated with money
Women %
Men %
Anxiety
75
67
Depression
57
46
Anger
55
47
Helplessness
50
38
Happiness
49
55
Excitement
44
49
Envy
43
38
Resentment
42
31
Fear
33
25
Guilt
27
22
Source: Furnham3
And, as a US survey found , even amongst those who have accumulated substantial wealth, negative sentiments remain common:
Figure 1 Negative money emotions amongst high-net-worth individuals
And, as a US survey found4 , even amongst those who have accumulated substantial wealth, negative sentiments remain common:
The negatives of wealth
People’s expectation
31%
Worrying about losing my wealth
31%
People judging my status
30%
Always wishing for more
29%
Illusory happiness
27%
Sacrifices
26%
Missing life experiences, dreams or opportunities
24%
Pressure
21%
Little free time
20%
Exposure to scams/frauds
20%
Sense of loneliness
10%
Source: Boston Private
Our emotional relationship with money is
complex and confounding.
According to experts, our relationship with money is driven by a complex array of beliefs, attitudes, and behaviours, many of which were shaped early in our lives by the interplay between familial, ethnic, and cultural influences, and then further refined by our exposure to media messages. So powerful can these beliefs and attitudes be, they can effectively negate any financial knowledge we have acquired and contribute to us making sub-optimal financial decisions5.
Financial psychologists Bradley Klontz and Ted Klontz refer to the term “money script” to describe these core beliefs about money6 . These beliefs are typically unconscious and likely learned during childhood and adolescence, influenced by our parents’ own money attitudes and behaviours. For example, were they frugal? Were they judgemental about others based on how much money those people had?
If our parents had a healthy relationship with money, (irrespective of their wealth) and talked openly about financial matters, then our attitudes and behaviours are likely to be similar. Conversely, if money was associated with some measure of shame or trauma – money wounds as author Ken Honda7 refers to them – then we are highly likely to enter adulthood with an unhealthy relationship with money, increasing the likelihood we will make poor financial decisions.
The 4 money scripts
The 4 money scripts – akin to ‘money disorders’ – which were developed from the Klontz research, are money avoidance, money worship, money status and money vigilance.
Money avoidance
01
A much broader target audience for the advice proposition
02
hey believe that wealthy people are greedy and corrupt, and that there is virtue in living with less money.
03
Avoiders may sabotage their financial success or give money away in an unconscious effort to have as little as possible.
04
Money avoidance is associated with ignoring bank statements, increased risk of overspending, financial enabling, financial dependence, hoarding, and having trouble sticking to a budget
Money worship
01
At their core, money worshipers are convinced that the key to happiness and the solution to all their problems is to have more money.
02
At the same time, they believe that one can never have enough. Money worshipers are more likely to have lower income, lower net worth, and credit card debt.
03
They may give money to others even though they can’t afford it or and be financially dependent on others
04
They are more likely to spend compulsively, hoard possessions and put work ahead of family.
Money status
01
Money status seekers see net-worth and self-worth as synonymous.
02
People with money status beliefs are more likely to be compulsive spenders or gamblers, be dependent on others financially, and lie to their spouses about spending.
03
They pretend to have more money than they do, and as a result are at risk of overspending. They believe that if they live a virtuous life, the universe will take care of their financial needs. They tend to grow up in families with lower socioeconomic status.
Money vigilance
01
Money status seekers see net-worth and self-worth as synonymous.
02
They believe it is important to save and for people to work for their money and not be given handouts. They are less likely to buy on credit. They also tend to be anxious and secretive about their financial status.
03
While vigilance encourages saving and frugality, excessive wariness or anxiety could keep someone from enjoying the benefits and sense of security that money can provide.
Financial Advice
To find out more about Milford
References
01
Stress and Wellbeing, how Australians are Coping with Life, Stress and Wellbeing Survey 2015, Australian Psychological Society.
02
Relationships Australia Online Survey, August 2015, relationships.org.au
03
The New Psychology of Money, A. Furnham, Routledge, May 2014.
04
The Why of Wealth Survey 2018, Boston Private, bostonprivate.com
05
Financial Wellbeing, a conceptual model and preliminary analysis, E. Kempson, A. Finney & C. Poppe, Consumption Research Norway – SIFO, 2017.
06
Money beliefs and financial behaviours: development of the Klontz money script inventory, Journal of Financial Therapy, Volume 2, Issue 1, 2011.
07
Happy Money: the Japanese art of making peace with your money, K. Honda, Gallery Books, 2019.
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