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10 Things to Know About the Psychology of Money

Money is a topic that everyone seems to relate to in their own way. It is a complex relationship built on many factors. Money is not a stationary entity. It is not a fixed object. For many of us, the concept of money is constantly revolving around data points, opportunities, challenges, and other factors that we interact with each day. We make decisions that directly impact our wallets, bank accounts, investments, and stocks. For many people, the goal is to ensure financial safety for the future. Our relationship to money begins early and lasts a lifetime. 

Human behavior vastly varies when speaking of money and the way it relates to our inner psychology. What does money mean to us? How do we earn it? What is our relationship with money? Do our bank accounts control our happiness? There are endless discussions around this topic, but let’s start right here. Here are 10 things to know about the psychology of money.

Emotion is a big part of people’s relationships to money. 

From the outside, money may seem like a physical entity. It may seem like something that we use to buy our essentials to survive. And for many others, it also allows us to buy things that are less essential, more things that we want. However, money is not strictly a physical thing that we pass back and forth throughout our life. Emotion is a big part of money in our world. Our relationship to money is emotional and intricately tied to our inner psychology. Emotion decides:

  • why we need money
  • how we make our money
  • how we share our money
  • how much of our money is allotted to spending
  • how much goes into our savings

Emotion is also a big part of our relationship with money because we all feel differently. The intricacies of money can promote different feelings within all of us. 

Family dynamics may influence how money is viewed.

Our family dynamics may shape our relationship to money. Some children are raised by parents or guardians who have a healthy and stable relationship with money. These children may not struggle with money in their adult lives. They may feel safe and financially cared for as they grow up. This can carry on into their adult life as they start a career and earn their own income. Some children are raised by parents or guardians who are extremely wealthy. Affluent families may feel bonded by their money. This can create a tricky relationship for a child. They may struggle to find their own independence and wealth seeing as they grew up thinking that they would always be taken care of. There are also many children who grow up in families who deeply struggle with money. This can affect their relationship to money in quite a few ways, including being fearful of spending their hard earned money. Ultimately, childhood and family experiences can play a big role in how an adult works and chooses to spend their earnings.

Money can affect happiness levels.

The golden rule is that money cannot buy happiness. However, money can affect happiness levels. Studies have shown that money does play a role in how happy someone is…but only to a certain extent. While mental and emotional health does increase with money, the study showed that this scale stops at a yearly income of around $90,000. Money can make people feel safe. It can make people feel better about their lives. It can provide people with the opportunity for meaningful experiences. 




Money may easily lead to greed.

As we mentioned above, the human relationship to money is emotional. It can promote emotions such as fear, guilt, envy, and shame. Along with these emotions comes greed. Money can very easily lead to greed. Greed is the intense desire for something. It is the selfish want to seize something for ourselves, especially wealth, power, and food. 

Many people desire to be rich or wealthy. Wealthiness can allow freedom, better mental and physical health, more control of your life, a nice home, a fancy car, respect from the people around you, and much more. Who wouldn’t want all of this? However, in many situations, the more money that someone acquires, the more that they desire. They ultimately believe that the more money they have, the better off they will be. Wealth may allow for freedom in many ways, but it has an emotional cost. It can lead someone to acting selfish, lacking empathy, acting out of line, being conniving, and more. 

Colleges and careers are created because of money.

College experiences and career opportunities can have many benefits. They can:

  • promote independence
  • allow for meaningful experiences
  • teach us new things
  • expand our skill set
  • help us make friends 

 However, these are additional benefits that we find alongside the main benefit. The main benefit is the ability to earn an income and live a life that makes us feel safe and happy. When we set goals for ourselves and follow a career path, we are attempting to reach our financial wants and needs. There are an unlimited number of career opportunities around the world. Some of these career require a degree and some do not. Some may be easier to excel in if you already have a degree. 

Earning an income at a young age can shape a child’s relationship with money. 

As we mentioned above, our childhood can shape our relationship with money. Our personal exposure to money during our childhood can shape us as well. Many children start working at a young age. While the jobs may not be similar to being president or being a CEO, they still require dedication. These jobs may also require:

  • following a routine
  • establishing independence
  • having responsibilities
  • following rules that are likely new for them

When a child or teen can take on these requirements, they can earn an income for themselves. They can start to form a healthy relationship by understanding how money works from a young age. 

Mental health conditions can lead to financial struggles.

Many people around the world struggle with mental health conditions. In America, more than 50% of the population will be diagnosed with a mental illness or mental disorder at some point in their life. This means that 1 in 5 Americans may experience mental illness in just one year. The most common conditions are:

  • alcoholism
  • major depression
  • bipolar disorder
  • ADHD/ADD.

All of these mental conditions can lead to financial struggles and insecurities. These struggles may include:

  • excessive spending on substances
  • being unemployed
  • having trouble doing a job properly
  • feeling misunderstood, and more

When someone does not seek help for their mental health conditions, they can easily have an unhealthy relationship with money. 



There are personality types associated with money.

Many experts push the importance of finding a healthy relationship with money. This means gaining an understanding of how money works as well as educating yourself so that you can make proper financial decisions. However, psychology experts also believe that there are seven personality types associated with money and learning which one you are is also crucial. Their money personality type is their approach and emotional response to money. Which as we mentioned above, is greatly shaped by our family or current personal life. These seven specific personality types are:

-The Compulsive Saver
-The Compulsive Spender
-The Compulsive Money Maker
-The Indifferent-To-Money
-The Saver
-Splurger
-The Gambler
-The Worrier

There is further research into the traits of each personality type and experts believe that most people are a combination, not just one type. 

Deciding what is “enough” money is can be difficult. 

How much money is enough? This may seem like a simple question. In reality, this can be tricky to answer for many people. The emotional ties that we feel when it comes to money can make it difficult to be rational. Deciding what is technically “enough” money may be easier said than done. 

Ultimately, the number is different for everyone. However, many individuals and families find peace with their number after they have done budgeting. Budgeting allows us to know how much money we need to earn in order to cover the essentials. For example:

  • food
  • clothing
  • rent or mortgage
  • health and wellness
  • transportation, etc.

When we know that we can sufficiently cover these costs each month, the stress and tensions lower. After this, budgeting allows us to see how much money may be allotted to additional expenses and purchases. 


Money can push people towards crime. 

There are many reasons that crime exists in our world. However, poverty may be the most common reason that people commit crimes. Experts believe that one in three billion people in the world are technically considered poor and living on extremely low income?

The truth is that we need money in order to survive. When the number of individuals and families financially struggling is so high, it is very common for people to turn to crime. In addition, when people are upset and suffering for a long time, they can be emotionally pushed to do things that they wouldn’t morally agree with. These crimes may include:

-Robberies
-Burglaries
-Auto-theft
-Fraud
-Electronic crime
-Money laundering
-Bribery
-Corruption

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