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  • MAP Asia Pacific Ltd

How culture shapes our money mentality

Alice, a 28-year-old healthcare manager from London, sat down a couple of years ago with some researchers to explain how her personal finances really worked. It might have made an economist’s head spin.

Alice, whose name has been changed, earned £80,000 a year and was highly educated. But she seemed to act like a child with money.

“She found it very easy to spend all the money on her credit card on nights out but diligently transferred money to her parents for safekeeping each month,” researchers at ReD, a consultancy, observed, noting that while Alice viewed her pension as a “back-up” plan, she also insisted that she did not trust it.

Instead, she presumed that her home was a reliable store of wealth — even though there had been turmoil in house prices a few years earlier. “For Alice, her mortgage was useful, productive debt,” the researchers said. “But her credit facility was negligent, indulgent debt.” Does this make any sense? Not if you take a classic financial industry view, which might focus on concepts of portfolio risk, the time value of money or rational expectations. After all, modern economic models are created on the assumption that money is a consistent, fungible item that should operate with the same logic as the laws of Newtonian physics. On that basis, what Alice does is weird.

But one dirty secret haunting the personal finance world today is that there are numerous consumers just like her. Most humans have peculiarly contradictory attitudes towards money.

What the researchers from ReD — along with others in similar fields — have recently been trying to do is to find a framework to explain this “weird” behaviour, using not economics, or even psychology, but by looking instead at the type of cultural patterns that are studied in anthropology.

That might seem odd. Anthropologists used to be best known for studying far-flung tribes in places such as Papua New Guinea or Samoa. Asking them to study credit cards and mortgages is not something that would occur to most mainstream financial services organisations.

“I can’t think of any investment manager who would have spent any time before thinking about anthropology or psychology,” observes Holly Mackay, a UK personal finance expert whose website, Boring Money, is read by about 1m people.



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