Psychology of Money
Money plays a significant role in almost every person’s life; most people handle money multiple times a day. In a day, we can move from various economic settings—such as closing a business deal, buying coffee, showing generosity by giving change to the homeless, or even purchasing a home. Because of what money can offer and provide, money motivates many people; their lives revolve around how much money they have and can spend. Money defines, to a large extent, people’s social standings and even their identities.
Money enables people to access valuable resources, and money is, unsurprisingly, a powerful incentive. It is commonly accepted that people work harder and perform better when paid. This assumption about money as a motivator energizes and directs behavior, which aligns with the traditional approach that has dominated research on the study of money. However, a large body of research from behavioral economics suggests that monetary incentives (e.g., paying for intrinsically interesting tasks or noble acts) can backfire because the meaning of money has gone beyond its original role as a medium of exchange or store of value. Nowadays, money has symbolic, solid, and psychological value, and money’s psychological meaning shapes how people think and act.
When money is involved, people focus on personal achievement and pursuing their goals, which may cause people to treat others as instruments to facilitate goal achievement. Values activated by (pursuing) money are aligned with self-achievement and hedonism but oppose spirituality and communality so that money could facilitate unethical behavior. Focusing on money may reduce the intention to attend to others’ needs and feelings during social interactions and allow objectification. Given that money serves as a means to an end, money’s instrumentality could also encourage people to focus on how others can facilitate goal achievement.
Over the next few weeks, we will explore many aspects of the psychology of money. The purpose of this series is to provide you with insights into your and others' behavior. This understanding is especially useful if you would like to effect change in your lives.
