Money can’t buy me happiness… or can it?!
A popular song lyric got us thinking about whether money can buy us happiness. Even if it can’t, it can be a contributing factor to our mental and emotional wellbeing.
The psychology behind financial wellbeing is important to understand so we can improve the financial wellbeing of individuals.
Recognising this, financial therapists in the US combine traditional financial advice with the psychological exploration of what is driving a person’s behaviour towards managing their money.
Lifestyle and responsibilities
Surveys frequently find that money is a leading source of worry and one of the main causes of rows between couples. It can be a subject that provokes strong emotions but many of us rarely discuss it, even with our closest friends.
Our survey, conducted at Employee Benefits Live last year, found the financial fears of workers include; ‘not having savings or being able to save’, ‘an inability to get onto the property ladder’, ‘not having enough to live on’ and ‘growing debt’. Topping the list was ‘not having enough in retirement’.
The use of credit cards, personal and payday loans, overdrafts and store cards is increasing and stats from The Money Charity from last November show that the UK has over £1.5 trillion in private debt.
Quest for financial wellness
Some of the main behaviours to achieve financial wellness include; successfully managing month-to-month finances, having financial freedom to make choices, protecting the family, the ability to absorb a financial shock and being on track to meet financial goals.
Stats from our Lemonade Financial Health Check show that 30% of people don’t have enough life cover, and 25% have no protection provision if they were to fall ill.
Shockingly, 81% do not have a will, or they have an out of date will. 48% of these people have a family but no will. And, 73% admitted that they aren’t currently on track to hit their pensions goals.
Psychology of financial wellness
One established psychological theory is Maslow’s Hierarchy of Needs. This is often illustrated as a pyramid and shows the most fundamental human needs at the bottom with the need for self-actualisation at the top.
Maslow’s theory suggests that the most basic needs have to be met before the human brain will strongly desire the needs further up the pyramid. These basic needs include food, shelter, safety and interestingly financial security.
The theory can be applied to employees who are concerned about their finances. If they haven’t fulfilled financial security then they are likely to struggle with the skills further up the pyramid which would have a profound effect on their performance at work.
The sub conscious can also affect employees at work. If your employees are worrying about their finances regularly, negative psychological effects can include low self-esteem and impaired cognitive functioning. This affects their learning, memory, attention span and problem solving.
Research from Neyber last year shows that 44% of women and 34% of men in the UK workforce have felt anxiety caused by financial stress. 55% of UK employees said that facing financial pressures affects their behaviour at work and ability to perform in their job. 8% of the UK workforce admit to taking time off work because of financial stress, with the average annual employee absence cost at £522 per employee, according to CIPD figures this year.
When it comes to financial wellness there isn’t a one size fits all solution. People will have different circumstances, attitudes, lifestyle and aspirations. Unless you understand the psyche of the individual it will be very difficult to change their attitude towards managing money and improve their financial wellbeing.
If you think about it if we didn't have to pay bills and keep a roof over our head, maybe we wouldn’t go to work at all. The reality for most of us is that we need a level of financial stability to be able to live to lifestyle we want to.
If we aren’t able to feel financially secure and positive in our relationship with finances, then this is likely to affect our happiness. So money can’t ‘buy’ you happiness, but it can be an important pillar in your life that contributes towards your overall happiness and wellbeing.
David Pugh is managing parter at Lemonade.
This article was provided by Lemonade.
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