We havewritten in the pastabout research that suggests that, by the age of 10 we have formed our money attitudes.
In his bookThe Soul of Wealth, Daniel Crosby likens this to ‘folie a deux’ or ‘the madness of two’. This is a defined psychological condition where two people who are close to each other (often family) develop a set of beliefs that they reinforce in each other until the views become extreme.
There is often a more dominant individual who is the original source of the views and imposes them on the other.
Whilstthe extreme examplesthat have occurred over the years are far from the kind of money attitudes we pick up as children, you can see why Dan links the two.
In the case of folie a deux, in terms of our attitudes to money growing up, the ‘two’ is most likely to be a parent and us as a child. This is why money attitudes can be so deeply ingrained, they are acquired at a young, formative age and often from the parental relationship which, good or bad, is powerful.
Unfortunately, our money attitudes aren’t often acquired through the rational discussion of money with our parent. They are most often acquired as we watch the parent’s behavior around money. This means that our parents may mess us up, but their behaviour is likely to be sub- or unconscious. AsPhilip Larkin wrote; ‘they may not mean to, but they do.’
As a child if we see our parents becoming stressed about money, we might become fearful of it as adults. This fear can lead us to want to ignore money and refuse to engage with it. As advisers we see this in the partner in a relationship who claims not to understand finances or leaves it to the other partner.
Our parents may have struggled with a lack of money and that created tension in their own relationship or an anger about poverty. That can translate into an unconscious belief that money is scare. As adults, that can cause us to hoard money and become unwilling to spend it. This is quite common with financial planning clients and it can become a large part of our job, trying to persuade clients to spend their money and enjoying life.
Our parents may have had money and then lost it again, through a redundancy, divorce or bad investment. That can give us the impression that money is fleeting, and we need to spend and enjoy it whilst it is still around. This combined with the way we have constructed our society to be constantly nudging us to spend, makes it the most common money behaviour. As financial planners we see this behaviour the least, as financial planning clients tend to be self-selecting. It is the savers, not the spenders, who have the money to need a financial planner in the first place.
It isn’t too late for you, there are some practical steps to changing your attitude to money.
The first step is to understand your current attitude.
To do this, sit down and go through your money memories with someone you trust (a partner or a sibling). Reflect on the times from your childhood where you are conscious that money was involved or a factor. Write down the memory and how you felt at the time (acknowledging that the memories we have are memories of a memory, not actual memories and therefore liable to having been filtered by our personality).
Using this list, start to reflect on your experiences and how they might have shaped you. Think about how you are around money now and whether you were influenced by these formative experiences.
It is always hard to change but it is much harder without understanding why we are the way we are.
A trusted person such as a partner, friend or financial adviser can help you to adjust your attitude to money. Changing behaviour and sticking to that course, is the best way to adjust your attitude.
Lastly, thinking about the impact the parental relationship has on our money attitudes, treat the next generation differently. Give your children and grandchildren a fighting chance by discussing money with them unemotionally and factually. Don’t overlay your advice with your own attitudes or hang-ups but give them facts. Use the resources available to help them. If they are old enough, buy them a copy of Morgan Housel’s brilliant book,the Psychology of Money. If they are younger, there are plenty ofschools resourcesthat you can tap into.
If you haven’t already signed up for our Cashflow Planning Advice via MyChoice, please do so and then we can talk you through your own money memories and attitudes.
We are currently advising Phoenix staff, from our office in Hook, Hampshire and throughout the UK.
