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Why we need to pay attention to our financial attitudes and emotions

Professor Mark Fenton-O’Creevy wants to help people manage their money better. During the past 25 years, his research has given us a new understanding of how attitudes and emotions influence our financial decisions.

Professor Fenton-O’Creevy first started exploring the area when studying risk-taking behaviour among investment bankers in the mid-1990s. “Surprisingly, traders talked a lot about their attitudes and emotions”, he recalls. “Some described how the stress of potentially losing millions had made them physically sick. Others explained how excitement and fear signalled opportunities to make a profit in a nervous market.” Fenton O’Creevy’s research ultimately showed that traders who worked effectively with their emotions made more money.

The true meaning of money

The professor’s high profile collaboration with the BBC on The Big Money Test – a 2011 survey of more than 100,000 UK adults - explored how the same emotions and psychology influence how we all manage our day to day finances. It found that how people look at money can significantly determine their risk of getting into financial difficulty. This insight helped influence the UK Government to build the importance of attitudes toward money into its Financial Capability Strategy for the first time.

“Money isn’t just money. For some people, it's security and safety. For others, it’s a way to express love. Many see it as freedom, allowing them to do what they want, while for some, it equates to power and status”, Fenton-O’Creevy reflects. “Seeing money as security seems to be the healthiest attitude, and less likely to lead to financial accidents, while thinking of it as love can lead to impulsive spending which can be very costly.”

Listening to our emotions

During the coronavirus pandemic, asked the professor to create a measure of financial distress to test with a sample of 2,000 people across the UK. “It gave us an incredible snapshot of people’s financial concerns from the 29% who constantly worried about their job security to the 28% who repeatedly checked their banking app due to financial anxiety”, he concludes. “But we mustn’t forget that our emotions – which after all come from our past experiences – can also help us focus on the financial challenges and opportunities we face to make better decisions. So, we shouldn’t be afraid of paying attention to them, as long as we manage them effectively”.

You can find out more about Professor Fenton-O’Creevy’s research on his blog.