The Psychology Of Money And Spending It | Dr Carol Yip | TEDxYouth@SJIIM

Summary

The speaker discusses the psychological aspects of money management, emphasizing that our financial habits are often shaped by experiences rather than formal education. They explore the transition to a cashless society, the impact of digital marketing, and the influence of peer pressure on spending. The speaker also touches on the dangers of credit cards and the importance of understanding personal spending habits. The talk highlights the need for self-awareness in managing finances and suggests cognitive behavioral strategies to change spending behaviors and make wiser financial decisions.

Takeaways

• 😀 Learning about money is primarily through personal experiences since formal education often lacks financial literacy courses.
• 🏦 The transition to a cashless society, especially highlighted in China and Malaysia, is making traditional banking less frequent and online banking more common.
• 👶 For younger individuals who haven't entered the workforce, money management is often taught through allowances from parents rather than earned income.
• 🔒 The convenience of auto-reduction features in banking can lead to a lack of awareness about spending, as bills and loans are automatically deducted.
• 💳 Credit cards are considered a double-edged sword; while they offer convenience, they can also lead to financial distress if not managed wisely.
• 👨‍👩‍👧‍👦 The role of family and parenting in teaching financial habits is crucial, with some families openly discussing financial decisions, while others consider money a taboo subject.
• 📈 The lack of personal financial planning, such as creating a personal profit and loss statement or balance sheet, is common despite being taught in an academic setting for businesses.
• 🎁 Psychological factors play a significant role in spending behavior, including societal pressure, advertising influence, and the desire to keep up with others.
• 🛍️ Shopping, especially online, can become an addictive behavior, similar to other harmful addictions, and requires awareness and management.
• 🍔 Understanding and tracking spending on food can reveal underlying needs and emotions that drive purchasing decisions, not just hunger.
• 🧠 Cognitive behavioral therapy can be applied to change spending behavior by altering thought patterns, which in turn can change feelings and actions.

Q & A

Why does the speaker believe that learning about money is primarily through experience?

The speaker believes that learning about money is primarily through experience because schools typically do not offer formal education on financial management, budgeting, or spending money wisely. People learn through their own experiences and life situations.

What challenges does the speaker mention regarding transitioning to a cashless society?

The speaker mentions challenges such as the potential loss of the ability to handle physical money, reliance on technology like online banking, the difficulty of remembering passwords as one ages, and the physical difficulties that might arise, such as tremors from diseases like Parkinson's, which could make online transactions difficult.

How does the speaker suggest family discussions about money can differ?

The speaker suggests that in some families, money is discussed openly, with decisions like going on a holiday being made collectively based on affordability. In contrast, in other families, money might be a taboo topic, leading to conflicts or a lack of financial planning.

What is the speaker's view on the use of credit cards?

The speaker views credit cards as potentially dangerous financial tools that can lead to significant financial distress if not used wisely. The convenience of credit cards can easily lead to overspending and accumulating debt.

What psychological factors does the speaker associate with spending behavior?

The speaker associates spending behavior with psychological factors such as peer pressure, the influence of advertising, social media, and emotional triggers. Spending is often driven by a need for emotional satisfaction, social belonging, or self-esteem rather than actual needs.

How does the speaker suggest managing spending habits effectively?

The speaker suggests using Cognitive Behavioral Therapy (CBT) principles to manage spending habits. This involves changing one's thinking patterns to influence feelings and, ultimately, behavior. For example, reconsidering the need to dine out for family bonding and instead finding alternative, less expensive activities.

What is the significance of Maslow's hierarchy of needs in the context of spending behavior?

Maslow's hierarchy of needs is significant in understanding spending behavior because it explains that people often spend money not just to meet basic needs but to fulfill higher-level needs like love, belonging, and self-esteem. The speaker encourages tracking spending to understand which needs are being fulfilled.

What are some reasons people might engage in online shopping, according to the speaker?

According to the speaker, people might engage in online shopping out of boredom, because it's convenient, or due to the influence of advertising and social media. Often, they purchase items they don't necessarily need but are drawn to due to psychological triggers.

Why does the speaker caution against becoming a 'shopaholic'?

The speaker cautions against becoming a 'shopaholic' because it is seen as a compulsive behavior similar to other addictions, like alcoholism. It can lead to significant financial problems and distress if not addressed.

What practical advice does the speaker give to avoid unnecessary spending?

The speaker advises being mindful of one's perceptions and thoughts that lead to spending. For instance, instead of spending money on outings for family bonding, the speaker suggests finding other ways to bond that do not involve spending, like going for a walk in the park.