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What's really in your wallet?

7 minute read

Writing a pithy articulation of financial wellbeing while around the world people stand against the systemic injustices underpinning capitalism feels hollow. Disingenuous. As we face the prospect of another recession and its perpetuation of economic inequality, it becomes more obvious that the way we’ve been living isn’t working – for anyone.

It’s okay to take a minute to be overwhelmed and heartbroken. Then it’s time to get to work dismantling our preconceptions, going head-to-head with our bias, and forging better ways of relating to other human beings.

Money is a good place to start. It takes up so much of our thinking and yet it’s rare to really think about it as a concept or consider how our knowledge of it came to be.

Because our attitudes to it are influenced by what it represents to us and our access to information about it, both of which have deep roots in our childhood experiences and the murky hinterland between what we were told and what we observed in the behaviors of those around us.

Everything I was taught about financial wellbeing seems to boil down to three magic words…

Don’t spend it.

To which I respond with three words of my own…

How very naïve.

And then singing “I like nice things” to the tune of Sir Mixalot’s paean to glutes.

This is a fair representation of how so many of us relate to our finances. We want to save money and we want nice things. Doing one makes us feel like we’re losing the other and all the potential gains it could bring. Humans aren’t great with loss; it’s why loss aversion looms so large in behavioral economics. Yet a critical analysis of the methodology leading to the identification of loss aversion highlights how research frames the decision to take the best as a change to the status quo. As a result, what looks like loss aversion is simple inertia, the tendency to stick with the status quo in the absence of a meaningful incentive to change.1

With it comes my favorite of all behavioral economics principles – ambiguity (uncertainty) aversion: the tendency to favor the known over the unknown.

Ah. The status quo. With it comes my favorite of all behavioral economics principles – ambiguity (uncertainty) aversion: the tendency to favor the known over the unknown. What we know feels safer because it’s familiar, and because it’s familiar we don’t question what our knowledge is comprised of or how it came to be. When it comes to money, questioning what we know is a fundamental part of cultivating lasting financial wellbeing.

Knowledge about the world gained through our earliest forms of memory is called implicit memory. They are formed early in life and don’t carry the internal sensation something is being recalled. Dan Siegel2 says that when implicit memory is retrieved, the brain’s neural net circuits which are reactivated are those associated with how we experience day to day life – like emotions, behaviours and bodily sensations. These in turn become part of the foundation for our subjective sense of self that filters experience in the moment. In short, ‘we act, feel, and imagine without recognition of the influence of past experience on our present reality.’2

Explicit memory is what we think of when we talk about remembering. There is a felt sense of recall. An example of explicit memory is semantic (factual) memory which gives us knowledge about the ‘facts’ of the world. Another is episodic memory, the memory of self across time. Explicit memory comes later as it requires specific regions of the brain relating to conscious awareness to develop in order for encoding to take place. ‘Later’ means it develops from about the age of one. Another aspect of memory and the development of self-worth considering is that from the age of two, children and caregivers mutually construct tales based on real-life events and imaginings; this co-constructed dialogue gives us the means to understand ourselves and the intentions and actions of those around us.

Our sense of self develops in relationship with the world around us as we locate and find ourselves within a social environment. The building blocks of the self, how each of us experiences the world and what we ‘know’ to be factually correct are in place earlier than we realise. How we think about and conceptualize money is therefore also more likely to be encoded in memory in ways that situate it beyond our awareness. This makes it especially difficult to change.

If a caregiver perceived people with money to be distrustful, there is a strong likelihood the child will also believe this and act – in potentially unconscious ways – to maintain this status quo. If they experienced a caregiver who used spending to soothe uncomfortable emotions, in what is known as affect regulation, there’s a likelihood the child will incorporate this into their mental model of money. As an adult, this could involve them having a difficult day which throws up uncomfortable sensations. They’re saving for a house but choose to dip into their savings in order to treat themselves to Chanel’s Les Beiges Healthy Glow 10-piece Touch Up set at a positively bargainous £95. You know… #selfcare. Someone who grew up in a household where caregivers modelled different means of affect regulation might not act in the same way. The point here is that the behaviour we’re interested in isn’t the spending behaviour. Nor is this person “bad” or “impulsive” for spending when they should have been saving. They are doing the best they can with the knowledge they have. Changing their financial behaviour is less about spending caps and text messages which alert them to when they’re in their overdraft, and more about understanding the emotional regulation required and helping them feel confident in their ability to cope with an entirely new status quo. Being willing to sit with discomfort and feel sad rather than getting a little something to take the edge off might not seem like an earth-shattering act of disruption, but the person is choosing to act differently to how they normally do and experience something they habitually resist.

Existing financial services providers overlook the fact that managing our finances is never just about bank notes and interest rates. It’s about freedom, stability, security and survival. What money represents is one of the most fascinating areas to examine if we want to cultivate a better relationship with our finances. Just as getting fitter or healthier requires encountering inflection points and choosing the action which keeps you on track, getting better at money management requires continually choosing to assess the status quo and risk disrupting it.

Access to help and support which integrates this new financial knowledge into a new sense of self is more important than shifting accounts and getting £100. Or getting a cashback credit card. Tactical interventions have their place but only take into account half the story, partly because we often bob along on the surface of things, buoyed by our own confidence in what we know to be true. By pausing and choosing to question what we know without judgement and with compassion for how we got there, we can be empowered in the truest sense of the word to dismantle damaging habits and construct more supportive ones. As we gain confidence in our ability to change our status quo, we can turn our attention elsewhere. This is how sustainable change becomes reality – one decision at a time.

This material has been prepared for general informational purposes only and is not intended to be relied upon as legal, accounting, tax or other professional advice. Please refer to your EY advisors for specific advice.


  1. Gal, D. & Rucker, D.D. (2018). The Loss of Loss Aversion: Will It Loom Larger Than Its Gain? Journal of Consumer Psychology (28)3, 479-516. ↩︎

  2. Siegel, D. (2012) The developing mind: How relationships and the brain interact to shape who we are (2nd ed.). Guildford Press. ↩︎ ↩︎