Why emotions matter for financial wellbeing
Here at Finthropology we are big fans of the idea that we should all stop pretending we can put our feelings aside when dealing with money. Instead, we should recognise our feelings about our finances—and even embrace them.
Money (and financial services) can help you exchange what you have with what you need, and to distribute wealth over a lifetime. So, money is an integrated part of everyday spending decisions as well as of life’s major decisions—the loss of a job, setting up home, raising a child, starting a business or saving for retirement.
All people have emotional relationships with their money, and these emotions play a critical role in our financial decisions, mental health and general wellbeing.
But most advice regarding money is practical and urges people to focus on making rational decisions. Not only do financial advice, financial tools, and financial literacy training tend to ignore emotions; advisors often counsel people to put their emotions aside completely when dealing with their finances.
This advice ignores a large body of behavioural research that shows that putting our emotions aside is actually impossible. In reality, people do not act like ‘rational economic man’ at all. For example:
People make all kinds of decisions that go against their best interest, even when it isn’t necessary
They forgo things they want to buy because they think they can’t afford it, when really they actually just don’t think they deserve it
They are terrified of facing the realities of their finances, even when they are actually in good shape
Or they close their eyes to bills and account statements and end up in bad economic shape, even though this was completely avoidable
Many people don’t recognise the role emotions play in their finances. As a result, they go through their lives completely ill-equipped to deal with their finances and make them work for the wellbeing of themselves and their families.
Attempting to ignore emotions only contributes to stress and puts people at risk of developing mental health issues. People commonly cite money concerns as one of the primary factors that impact their mental health. Unfortunately, there is little professional guidance available to learn how to better manage emotional states regarding finances.
What would happen if:
We understood how emotions can affect everyday financial decisions and wellbeing?
We could design, develop and deliver financial solutions that take account of customers’ emotions?
We could create a culture of money that recognizes emotions and different personal perceptions of financial potential and troubles?
We could learn to understand the connections between emotions and finances, and to treat emotions as a valid part of financial lives rather than something that must be buried?
We could learn not just to be financially literate, but also emotionally financially literate?
And what would the financial ecosystem look like? Would it:
Encourage customers to consider their feelings as much as figures?
Include more learning opportunities for customers?
Provide different tools to work with financial decisions—like games, drawings, storytelling or mood ratings?
Involve more customer dialogue to complete insights gained from AI and transactional data (because the last only explain “what” and not “why”)?
Focus on families or groups of people more than individuals?
Include more focus on diversity and societal impact?
At Finthropology we ask ourselves these questions so that we can stimulate others to think and act. Does your organization already offer services or programs that take financial feelings into account? We would love to hear your story—what worked, what didn’t, and what advice you would give others. Or are you just curious and would like to explore this topic more? Then feel free to reach out to us to ask questions or challenge us.
