In recent years psychologists have uncovered all kinds of fascinating and strange new things about the psychology of money. It is a huge and ever-growing topic with new research coming out all the time, so let’s take a quick look around and spot some of the major themes and headline findings.
Quick word of warning, though, some of the links below are to press releases, which must be taken with a pinch of salt! No fear, in future posts I’ll be looking more closely at some of these studies. Let me know which you find most intriguing…
Money and emotions
I recently covered a study showing that more money doesn’t always equal more happiness. That said, it’s no fun being poor. That’s probably why a medium-sized lottery win might increase many people’s happiness over the long-term. Say $100,000; not enough to make us disgustingly rich, but just enough to make us feel pretty good.
People will spend more money when they feel down, but they are often unaware of it. Sounds like a side-effect of how little access we have to our own minds. Money can make you happy, though, the trick is to spend it on others as this seems to make us more happy.
Money and shopping
It turns out most of us aren’t that good at shopping. For a start we tend to think one of two identical products is higher quality if it has a higher price. Doh!
And shopping might even have a momentum of it’s own. Buying that very first item can open the floodgates, and your wallet. Then, later, once we’ve had the stuff for a while we really hate to throw it away until we’ve had our money’s worth – even if we’re not enjoying using it.
Money and personality
Here’s a free psychological pearl of wisdom for you: people are different. That means that your system of money management needs to ‘fit’ your personality. If you’re an extreme optimist, though, there might be no hope for your money management techniques. Apparently these perennial Pollyannas are prone to spending their money unwisely.
The link between intelligence and money is a bit of mystery. People with a high IQ tend to be more patient in financial matters. That might make you think they would be more wealthy, but there’s barely any relationship IQ and wealth.
Theories about money
Have you heard of mental accounting? This is the idea that we put money into different imaginary accounts in our head, such as current, savings, investment etc., then make different decisions depending on which imaginary account we’re thinking of.
While we’re thinking about mental accounting, let’s imagine our mental bank accounts don’t contain money, but something else. What else is analogous to money? Well, they say money is a drug, and perhaps they’re right. Or maybe money is like food (which isn’t far from a drug for many people). In fact, perhaps people’s age-old desire for food has now been replaced with money?
Apparently, though, one thing money isn’t like is time – well not psychologically at least.
Money and the brain
The brain may be remarkably resilient, but any kind of brain damage is often bad news for psychological functioning. Money management skills are no exception. No, definitely no exception.
If your brain is working, though, you’ll probably find that its ‘reward centres’ will ‘light up’ if you make more money than your colleagues. Now money sounds like a drug again.
Money and sex
The cliche is that men want good looking women and women want rich men. But research suggests men are just as attracted to solid financial prospects in a mate as women are. So having money is probably good for getting a mate, but does it mean you’ll get more sex? No, according to this study which fails to find a relationship between wealth and sex, or number of sexual partners.
Money and gambling
It’s an oft-repeated ‘fact’ that losses are psychologically twice as powerful as gains. In which case, why do people gamble? Perhaps the key is in the context. When it’s small amounts of money it seems that then it’s the gains that loom larger than the losses. Also, the exact circumstances are obviously going to be important.
Money and society
Doesn’t foreign money look and feel weird? Yes, it appears we really do treat foreign money like play money, even though it’s someone else’s real money.
And finally, the saddest study of all. People who are reminded about money prefer to play alone, work alone and put distance between themselves and other people.
[Image credit: Thomas Hawk]
Published: 31 March 2008