What is the first emotion that you feel when I say the word “money”? Why some of your friends are savers and some are spenders?

Money has powerful emotional associations. Ask people what emotions are most frequently associated with money and research provides the following rank-ordered list: anxiety, depression, anger, helplessness, happiness, excitement, envy, resentment.

Psychology professor Adrian Furnham, in an article from psycologytoday.com explains the relationship between money and the human brain.

Money can stand for many things:

  • Security: Emotional security is represented by financial security and the relationship is believed to be linear – more money, more security. Money is an emotional life jacket, a security blanket, a method to stave off anxiety. Money bolsters feelings of safety and self esteem and so is hoarded.
  • Power: Because money can buy goods, services and loyalty, it can be used to acquire importance, domination and control.
  • Love: For some money is given as a substitute for emotion and affection. Those who visit prostitutes, ostentatiously give to charity; spoil their children are buying love. Others sell it: they promise affection, devotion, endearment and loyalty in exchange for financial security.
  • Freedom: This is the more acceptable and more frequently admitted attribute attached to money. It buys time to pursue one’s whims and interests, and frees one from the daily routine and restrictions of a paid job. Money buys escape from orders, commands; everything that restricts autonomy and limited independence.

Money and Rationality

Bankers, Economists and Financiers assume that people, like themselves, are rational with respect to their own money. But they could not be more wrong. People are ignorant, irrational and a-rational with nearly everything about their money. The belief about what money is good for; how best to acquire, multiply and store it; and about the happiness it brings are demonstrably false.

Money matters are frequently discussed – the rate of tax, cost of living, property prices – but personal finance still remains a taboo topic. Celebrities and ordinary mortals seem happier to talk about the intimate ramifications of their sex lives and mental health than about their monetary status, salary or financial transactions. Also, many people with a lot of money are very bad at managing them; it’s not rare to see movie stars or athletes once rich are now struggling at arriving to the end of the month

In our culture, money issues are often denied, overlooked, or ignored in courtship, argued about constantly in marriage; in fact money is the 1st reason for divorce for early couples. Contested wills between different claimants can turn any reasonable human being into a wolf or break apart families.

Studies show that parents rarely talk about money to their children but that children acquire many of their money habits from their parents. Surveys show that over 90% of adults would like their children to know more about the financial reality of life than they currently do, but that they are not really confident enough to ensure their children are financially literature, sensible and mature.

The new discipline of behavioral economics is based on thinking fast and not slow: that is using rules-of-thumb which lead to erroneous conclusions. There is now a huge interest on nudging people along by cleverly presenting information in a particular way which often hood-winks them.

Money as a motivator

One of the most debated issues is the motivational power of money at work. Where do you stand on the issue of money as a motivator at work?

  • Money is an effective, powerful and simple motivator: It’s natural to compete and when rewarded with money for better work productivity and standards are raised for all.
  • Money sometimes, but not always, motivates: For those who are very well paid, even quite large amounts have a minimal motivational effect. Worse, money rewards can and do set employees against one another leading to conflict
  • Money is not effective and has only the power to de-motivate: Money rewards (bonuses, performance related pay) may bear little relation to what the worker does, or feels. There are better ways to motivate people, other than cold cash.

The data on this topic is surprising and the correlation between job and salary satisfaction is very low. The research shows that employees in the top half of the salary range have very much the same level and degree of satisfaction than those at the bottom level.

A recent analysis by Doug Short, vice president of research at investment group Advisor Perspectives, shows that money can only buy happiness up to a point. But just how much you need to get to that threshold really depends on where you live:

As you can see from the infographic, in the majority of the US, most of the families are happy with a $65k-75k annual income. The higher income required in the other States is most likely connected to the higher life cost.

Money as a Demotivator

Can money be more a cause of negative than positive effects? Some psychologists think so:

  • Salary increases are temporary: The effects of a pay rise very soon wear off as people adapt to their new conditions. You need a great deal of it to stop adaptation effects (it can take as little as two to three months to get used to the higher salary).
  • Because of our natural competitive nature, what leads to pay satisfaction is not so much absolute salary but comparative salary. So if my salary goes up dramatically, but so does that of my comparison group, there is no change in my behaviour. No matter what people are paid, if they believe, with or without evidence, that they are not equitably and fairly paid, they become demotivated.
  • Money is not everything; would you chose money over health or time with family? Many would be happy with more time off or more job security than more money.
  • Taxes and spend can eat out much of the increase so the benefits might be just marginal and not worth the effort

Ok but what can I do if I really want to spend money? Well, at least do it for something that can increase your happiness scientifically. Check out my other article on 5 Ways Money Can Buy Happiness, Backed by Science.


Money remains a taboo topic, more so than sex and death, and yet it can arose enormous passions in the workplace and the home. It is precisely because it is often not openly discussed that it can cause so much argument and stress.

For the manager three points are important. People differ widely in how they think about their money and do not assume they are like you. Money is one, and a rather minor, source of motivation and satisfaction at work. Concentrate on managing better. Unless you are very clearly able to show a relationship between salary and productivity/seniority/speciality it is best not to encourage social comparisons.