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Future of Money

The Psychology Behind Our Inability to Talk About Money

What's stopping young Australians from opening up about cold hard cash?

by Simon Morgans
09 April 2018, 7:47pm

Illustration by Ben Thomson

This article is supported by Xinja, who are building the first Australian 100 percent digital bank designed for mobile. In this series, we look at our relationship to money.

For a nation that loves spinning a yarn, Australians are close-lipped when it comes to talking about money. According to surveys like this one, we’d rather share personal information about our sex lives, politics, and religion more than we would money. We're also worried about finances; the annual Stress and Wellbeing Report 2015 by the Australian Psychological Society found that finances regularly top our list of concerns. It's a touchy subject. The problem is that our inability to talk about money is doing us harm.

Here we are, living in one of the richest countries in the world, in the richest period of human history. So why is it such a battle to open up about money? "I think we like to play down our differences, particularly when it comes to wealth. It varies significantly by culture, but to discuss money can be seen in bad taste and that money matters are private to the individual or couple," Betsy Westcott, director of retail banking at Xinja, tells VICE. As laid-back and non-materialistic as we might like to think we are, money is deeply tied to status. The amount of money you have has had a major impact on your life. It plays a large part in determining where you live, where you went to school, if and where you go on holiday, and the clothes you wear. If you’ve got piles of it, people laud you for your hard work. If you’ve got little of it, it’s assumed that this must be some fault of your own.

“It’s such a loaded conversation, and there is so much subtext and hidden meaning wrapped up in money. Money is shorthand for happiness, power, and personal efficacy, so it can be very scary," Daniel Crosby, behavioural finance expert at IncBlot Organizational Psychology, tells Reuters. When money is short, it can be seen as a deficiency on the part of the breadwinner, and when there is lots of money, there can be fears that greed takes the place of genuine love."

Discomfort at discussing money also transcends class, says behavioural economist Sarah Newcomb: “Among the very wealthy, discussing money is often considered gauche. It’s tacky to gloat. In less privileged homes the stress of daily money management is something parents often want to shield from their children and friends.” So, whether you’re minted or hard up for it, you’re not alone in avoiding the subject—and there are good reasons for this.

One of them being that there's a lot to suggest that we fear loss far more than we value gain. The irritation of losing $50 is far greater than the thrill of finding a pineapple on the side of the road. Russell A. Poldrack, Stanford Professor of Psychology, conducted a live experiment on people gambling with real money and found evidence that supports the theory. “Most interestingly, the reactions in our subjects’ brains were stronger in response to possible losses than to gains” he told Scientific American. It’s possible this tendency developed during evolution when losing a day’s food could mean death, while finding the same thing didn’t assure us of another days survival because we had nowhere to safely store it. How does this relate to our willingness to discuss money? The loss of face you suffer when you find out that you’re not doing as well as your friends weighs far more powerfully on our minds than the self-esteem boost that comes from discovering that we’re on a better wicket.

There’s also conditioning. According to Jayne Pearl, author of Kids, Weath and Consequences: Ensuring a Responsible Future for the Next Generation, there are two reasons parents give for not talking to their children about money. Firstly, they’re not confident in their ability to be a financial role model. Secondly, their own perceived lack of knowledge saps their confidence to impart financial wisdom on their children. “We think we need a Ph.D in finance to be able to teach our kids when it’s not true at all. All you have to do is talk out loud about what you’re doing as you go about your business” writes Pearl. Kids who didn’t get a head start on money are likely to make larger mistakes later in life, undermining their own confidence and continuing the cycle of financial illiteracy. With Australians owing an eye-watering $22 billion of credit card debt, and household savings lower than they’ve been for a decade, it’s up to us to break the cycle.

A powerful reason to have the hard talk about money is to get comfortable with it. Psychologists have long known that avoiding something that makes us uncomfortable only exacerbates it. The answer is to face up to whatever is stressing you out until it no longer scares you. Clinical psychologist Noam Shpancer likens it to the fear of fear. We resist doing things that we fear may scare us, even though it makes it worse. “The only way out is through. If you’re anxious about spiders, you need to handle spiders. If you’re scared of the elevator, you will have to ride the elevator repeatedly. If you dread talking in class, you will need to start talking in class,” Shpancer writes on Psychology Today. According to Shpancer, avoidance is the worst possible solution because it prevents your nervous system from habituating. “If you avoid the elevator at work, soon enough you’ll be avoiding all elevators, and then all buildings with elevators, etcetera. Soon enough, you’ll be living in a prison of avoidance.”

This was certainly the case for Zac. Despite having an accounting degree to his name and a well-paid job in finance, Zac realised that he was in his late 20s and had nothing to show but credit card debt. “It suddenly hit me that I spent all day managing the company’s financials only to switch off at 5pm and blow money I didn’t need to. Loads of my mates are out there buying houses while I’m living paycheck to paycheck. Who wants to admit to that when you’re supposed to be a numbers guy who’s really good with money? It took ages until I fronted up to it because each fortnight I just chucked it in the too hard basket: too hard, too depressing, and too embarrassing,” he says.

After reading The Barefoot Investor, Zac and a friend from work decided to get together one night a week to talk about their personal finances. “This was pretty rough at the start as we’re both pretty competitive but after a few beers we managed to work through the steps and devise a plan. I stuck to it because I didn’t want to be forced to admit failure and once you get into it, it’s not so scary,” he says. “Now, for the first time in years, I actually live within my means and have savings.”

Refusing to talk about money may also be harming your relationships. Especially where you and your partner share finances, being able to work through stressful issues like money together can be source of intimacy says clinical psychologist Susan Heitler. “If your skills for talking together about sensitive issues are sufficient, stresses will become opportunities to enjoy the benefits of true partnership. Working out solutions to challenges between you, that’s when being couple brings you ultimate blessings or affection and a joyfully shared life.” It also works the other way around—refusing to talk about it can bring alienation. “Being withholding about money is a form of loss of intimacy. Where there is no intimacy, the relationship will die, guaranteed,” says Daniel Crosby.

Rachel discovered this the hard way. Almost five years into a relationship, she and her partner were preparing to pool their savings and buy a place. “By this time we’d already opened a joint bank account that we both had access to. He was a bit of a tight-wad and was always badgering me about how much I spent on clothes and makeup,” she tells VICE. This frugality started to ring alarm bells when Rachel found a large stash of $50 notes in their flat. “At first I thought maybe he was a drug dealer, so I confronted him.” Her partner explained that he found her spending habits to be extreme and was putting his money away secretly. This revelation set off a wave of arguments that eventually broke them up. “After that, we were basically done. I couldn’t be with someone that didn’t trust me with money, I felt like he was condescending me by hiding it like that. You can’t be with someone who doesn’t trust your judgement”.

If we’re going to get on top of our money, we’re going to have to start by talking honestly about it. Besides, why would you pay through the nose for a financial planner, when you can get so much benefit from having a chat about money with your those around you? "Knowledge is power, or, in this case, knowledge helps you make better financial decisions," Xinja's Westcott says. There’s nothing to lose but a taboo that’s holding you back.

This article is supported by Xinja, who are building the first Australian 100 percent digital bank designed for mobile. You can join the waitlist here.