Exploring the Psychology of Money: How Our ‘Money Scripts’ Influence Our Financial Habits and, ultimately, our financial outcomes.

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Exploring the Psychology of Money

As a financial adviser I have, for many years, wondered why people make very different financial decisions in the same circumstances.

For example:-

  • Why is it so hard to get a spender to save money?
  • Why is it equally as hard to get a saver to spend money?
  • Why is it that 2 people with the same income can end up in significantly different financial positions at retirement?
  • Why do lottery winners, sports and media personalities go bankrupt?
  • Why is that some people who barely get by financially are significantly happier than some millionaires?
  • Why do some people feel they need to have a six figure sum in the bank to feel ‘safe’ when others feel rich when they accumulate £500?
  • And finally, why does that friend of yours always try and duck his round at the bar when he’s got more money than you? Come on, we’ve all got one of them haven’t we?

These questions have intrigued me for years so, in my quest to find an answer, I decided to invest in the Psychology of Financial Planning course with Dr Brad Klontz and Dr Charles Chaffin.

Brad Klontz is a prominent psychologist specializing in the psychology of money whilst Dr. Charles Chaffin, among many other titles, is co-leader of Client Psychology Program within Wharton Executive Education.

Financial Flashpoints

In one of the modules we did a deep dive into understanding financial flashpoints and how they lead to our money beliefs.

Financial flashpoints are financial life events or life stages that leave a lasting psychological imprint. Ive had them and I know you’ve had them.

To give a simple example, growing up in poverty can leave an extremely traumatic experience.  If you grew up struggling to meet basic needs you’re going to develop a certain set of beliefs about the world and around money that will enable you to make sense of that experience.  These beliefs will help you to cope with the stress, and sometimes they will allow you to thrive because of it.

One such belief you might end up with is ‘there’s not enough money and there’ll never be enough money.’  When this belief gets reinforced by your experiences and your emotions, especially in your formative years, it can be very difficult to change – even if you’ve climbed the socio-economic ladder and acquired an abundance of money!

Myself, and many of my clients, have had this type of background and so they are still driven to acquire more due to this fear of running out – even if the facts show this is extremely unlikely.

Very often, when you explore why this belief system exists, either they grew up poor, their parents grew up poor and maybe even their grandparents grew up poor.  This is why you often see families that are very successful financially now, but their grandparents emigrated from a poor country 100 years ago with nothing.  They then did everything they can to earn money and save money, and they pass these anxious characteristics down to future generations.

Conversely, there are also people that grew up poor who develop the opposite belief system.  ‘Why bother saving up, why bother investing when there’s never going to be enough anyway?  I may as well just spend everything I have when I get it.”

Growing up wealthy will also give you a certain set of beliefs.  In this environment you can easily develop a belief system that ‘there’ll always be enough money so why bother saving and investing when its easy to come by’?

There are many other factors that will also determine your money beliefs such as your culture, your religion, the dinner table talks etc but, for brevity, I’ll just use the socio-economic examples for now.

The key issue with the subsequent money belief systems we develop is this – we believe them to be 100% truths, even if the facts say they are just partial truths or not even true at all.

So we end up making financial decisions as adults that our young selves would make.  When you think about it, that’s scary! You could argue that we are subconsciously taking advice from a young child. That’s because these beliefs, these emotions and these experiences become stored in in our subconscious minds – so we make many financial decisions intuitively, believing we are making the right decisions but without actually knowing WHY we are making those particular decisions.

To summarise, our backgrounds create our beliefs, our beliefs create our behaviours, our behaviours produce results and then these results reinforce our beliefs.…..whether good or bad.

In financial psychology, these beliefs are called money scripts.

What are Money Scripts?

Money scripts are deeply-held beliefs and attitudes about money, passed down through generations, which shape our financial behaviour and determine how we interact with our finances. They shape how we think, feel, and act when it comes to money and can have a profound impact on our financial success.

Our money scripts can determine our income, our net worth and a whole host of other financial behaviours

For example, here’s a question – would you think it sensible to keep all of your life savings under the bed? Probably not. But then what if you’d lost all of your life savings in one of the banks that went bust in the 1930’s great depression? Can you see now why someone of that generation may not want to deposit their money in a bank ever again?

Let me be transparent now and tell you a bit about some of my financial flashpoints that have led to my money scripts.

I remember when I was a young boy, every Saturday morning my parents would take me to the local market to get the week’s groceries.  We never had a car and so walked a couple of miles each way.  On the journey we had to walk on a foot bridge which went over the coal pit. Instead of my Dad giving me 50p to spend on sweets or a model airplane, he came up with a genius idea to secretly drop coins on to his foot (to stop the coins making a noise when they hit the ground) and then point them out to me.  “There’s 5 pence on the floor there son”, “Look, you’ve just walked past a 10p piece Brian.”  This would happen each Saturday morning and I still remember the fun and excitement in collecting 2, 5 and 10p pieces until I ended up with a nice little sum that I could spend at the shops.

Why am I telling you this? Well as part of coming to terms with our own understanding of our relationship with money, it’s important to remember the first financial experiences we ever had and how they had an effect on our relationship with money.  And it’s this Saturday morning game that my Dad invented that is the first memory I have to do with money.

So this ‘flashpoint’ became something that started to build my own ‘money script’.  You see I’ve learned that this experience gave me a feeling of ‘excitement’ towards money.  By ‘finding it’ and then sticking it in my pocket, it gave me the ability to start getting excited about what I could buy with it.  So, to a 7/8 year old child, money started to represent excitement, opportunities and treats.

The next significant ‘money event’ I remember was several years later.  At this stage I was a young teenager, so the age where looking cool and ‘fitting in’ was the most important thing in life!  At this age my Dad got made redundant and so our financial position changed overnight.  New model airplanes and footballs became a little harder to come by.  The language and culture also shifted in the house.  I started to hear things like:-

“Money doesn’t grow on trees you know”.

“Eat all your dinner up, you don’t know where your next meal’s coming from.”

“How much? I could make one of them for a few quid”.

“Who left the room and left the light on?”

“Do you think I’m made of money?”

I’m sure many of you could add a few similar sayings to this list.

Due to the economic climate (it was the early 80’s) and the fact that my Dad was 58 years old (yes I know, I wasn’t planned!) he found it hard to get another job.  So my Mum had to go get a job as a part-time cleaner and I ended up getting free school clothes, which is not the best look for an impressionable 14 year old.  Neither is queuing up at the school reception each day to get my ticket for a free school meal.

Each day I would sneak off when my other ‘cool’ friends weren’t looking and collect my free school dinner ticket.  My biggest fear was my high school crush walking past with her friends when I was collecting my ticket.  When we queued up to enter the dinner hall I would secretly pass my dinner ticket to the dinner wardens so no-one would see.

So this experience became my 2nd significant ‘money relationship’ moment.  Even though these events were 40 years ago, I remember them very clearly.  I also always remember saying to myself that, when I grow up, I’m not going to be poor so I don’t have to suffer these embarrassing situations anymore.

Now please hear me out on this. I’m not saying it’s wrong to be poor, and I’m not saying its right to be wealthy.  I’m just being open and honest about my experiences as an impressionable child, recounting my earliest memories of money and how they subsequently made me feel – as requested by the course – and these events are what stood out.

One was positive and gave me the feeling of excitement for I could buy in the toy store.

One was negative and gave me feelings of shame and embarrassment.

So, as an impressionable 14 year old that wanted to keep up with the socio-economic status of my ‘better off’ friends, I started to work on a milk round.  My Mum, God bless her soul, would get up at 4am and make me some breakfast before I had to get on the milk van at 4:45.  In the winter months she would get up even earlier to light the fire so I could get dressed in the warmth as we didn’t have central heating.  I’d finish the milk round at 7:30am, have a bath (I stunk of milk), and then go to school.  I did this 6 days per week for £14.

When I left school and went to college I continued working by collecting glasses in a nightclub.  I’d work from 8:30pm until 2am, get a taxi home and then fall asleep in lectures on a Friday!  This was in the late 1980s and I used to earn £34.20 from my three shifts and, every week, I put £10 pound of this into my bank for the future….remember, I didn’t want to be poor.

Now, as I look back on these memories in my mid-50’s, I realise how all these events and experiences were significant in shaping my relationship with money.

For me, I’ve come to realise (rightly or wrongly) that my ‘money scripts’ are:-

Money equals security and safety.

It’s scarce rather than abundant.

You have to work hard for money.

Become successful financial makes you feel proud and secure.

It can be exciting to earn money.

Fast forward to today my 50’s and I can now see why I get excited about progressing my business (formed by the first experience) and why I’m a saver more than a spender (formed by the 2nd experience).

So how can my story help you?

Well in my next article, get ready for an eye-opening journey to uncover the 4 common money scripts that we subconsciously adopt – and I’ll reveal the one script that truly works for you, not against you.

I will even offer a free questionnaire to those that request it, that will help you discover which one(s) you’ve adopted.

But that’s not all – by recognizing and comprehending these money scripts, you’ll gain real-life advantages: conquer subconscious barriers, make smarter financial choices, nurture healthier habits, and experience transformative shifts in managing your finances.

Stay tuned.



About the Author:

Brian Butcher is a Director at Ideal Financial Management Ltd and has been giving financial advice for over 25 years. He is also the Author of ‘10 steps to Financial Success - how to get the best life you can with the money you’ve got’ Available on Amazon at https://www.amazon.co.uk/10-Steps-Financial-Success-money-ebook/dp/B00DQYD5LS