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Why is money conversation taboo?
Money conversation is still considered taboo in Australia.
Money should be a pretty objective topic. It’s all maths! But money gets weighed down with a lot of psychological baggage. Money means different things to different people, including social status, self-worth and security.
– Social Status
Being wealthy has always improved a households social standing. Thorstein Veblen first coined the term “Conspicuous consumption.” The term describes the very visible display of non-essential, extravagant purchases to improve one’s social standing.
And there are social benefits associated with appearing rich. A series of fascinating social experiments, found people more compliant and generous to those wearing luxury brand clothing. Researchers even calculated that the Dutch Heart foundation could fund an extra 133 heart transplants per year by getting charitable donation collectors to wear a designer label shirt!
Conspicuous consumption has become commonplace, with the wide availability of credit. And it seems to be most popular amongst those with lower incomes. Conspicuous consumption drops 13% drop when household income increases by $10,000. Disadvantaged households sacrifice spending on health, education and savings to prioritise visible purchases when compared with higher-income households.
The relationship between actual wealth and portrayed wealth is skewed in order to avoid the stigma of poverty.
With so much effort put into maintaining illusionary appearances, honest money conversation that might expose a vulnerable financial position is unwelcome.
– Self Worth
Closely linked to the above is the link between money and self-worth. People are insecure and tend to compare themselves with others. Society has taught us to think of money as a scoreboard in life. Those that have it are winners, those that don’t are lower in the pecking order.
This is likely why conspicuous consumption occurs to raise our perceived rank in society amongst peers.
But many people also internalise the relationship between money and self-worth. No matter how much they try and compensate for a poor financial situation by social signalling with consumer goods, they know the truth. And if you judge yourself to be worse off than your peers (whether that’s true or not) your self-esteem can suffer.
A study of consumption and mindset found women with a fixed mindset felt more beautiful after using a Victoria’s Secret brand name shopping bag. Fixed mindset students considered themselves more intelligent and better leaders after using a pen branded the “Massachusetts Institute of Technology”.
Of course,everybody has their own set of strengths, skills and virtues that should be the basis of self-esteem, far more than money. Particularly as we all get a different financial headstart (or not).
But this link between finances and self-esteem makes money conversation a touchy, sensitive subject. People can be defensive, angry, resentful, ashamed or boastful about their financial situation. Not an ideal mix of emotions for a calm and helpful conversation.
Money represents security to a lot of people. Having a paid-off home has huge emotional benefits for many, who feel no matter what happens, they will keep a roof over their heads.
If you’re struggling to scrape enough to pay bills each month, money becomes a major source of insecurity and stress. Broaching a financial conversation whilst this kind of stress is in the background can lead to heated arguments fast.
Inconspicuous Consumption & Discreet Wealth
Some people who value money as a major source of self-esteem and appreciate the social benefits of appearing wealthy will brag about financial success. Very few people want to listen to this bragging!
But most in a good financial situation will avoid talking about money, to avoid the appearance of bragging or being insensitive. Showing off wealth, through conversation or conspicuous consumption can be seen as crass and classless.
A study into inconspicuous consumption found 94% of Tokyo women in their twenties owned at least one Louis Vuitton item. When these luxury consumer items are so commonplace, they are no longer a signal of superior wealth. Experiences, services and other inconspicuous spending in line with values and beliefs are becoming more desirable ways to consume for the financially elite.
The Problem with the Money Taboo
The financially successful often have the knowledge and experience to give those wanting to improve their finances a hand. But because of the money taboo, those with money keep it discreet and those wanting to learn feel uncomfortable asking a would be role model finance questions.
Cue the spruikers. Thousands of youtube videos exist, usually by young men claiming they made their wealth quickly and effortlessly. They may be sat in a sports car to signal their extreme wealth. It may well be rented for the purpose of creating perceived authority.
If these guys are truly wealthy, is it through their “secret method”? Or from the courses and products they are spruiking? I suspect they are growing wealth by fooling those they claim to be helping.
Why are Money Conversations Helpful?
We stand a lot to gain by sharing money conversations more often. Almost everyone has limited resources, so should be using them efficiently and getting as much bang for their buck as possible. From a good deal on mobile phones to remuneration at work, particularly in areas where there is potential for discrimination in pay leading to pay gaps for women and minority groups.
Our other precious, limited resource is time. No one has the time to research every single decision they make in detail. Pooling research efforts on sites such as this one means the effort put into researching a decision, like whether solar panels are financially worthwhile, is shared with many.
The other advantage with sites like this is that it seems to overcome the social taboo around talking about money. I speak to you as if you are the best mate, someone I have known for years and trust with all my secrets. Many finance blogs are anonymous to allow this kind of sharing without fear of judgement or negative consequences in offline lives.
Important Money Conversation Milestones
Marriage or Cohabiting Relationship
Your biggest financial risk in life is your chosen partner. For better or worse, you’re both stuck with the consequences of each others financial behaviour through the marriage. Divorce leaves no-one better off financially.
Marriage can destroy you financially if your partner is a gambler or compulsive conspicuous consumer. But if you are both on the same page, you can achieve incredible things as a team.
Most relationships are somewhere in between the two extremes, including my own. There is a relative “spender” and a “saver”. By focusing on shared goals and dreams, we have compromised a solution. We save a fair bit, but still splash out on good food, kids activities and holidays.
Get on the Same Page on Goals, and Work Out How to Use Money to Get you There
Discussions and plans about goals and dreams is important before taking the big decision to cohabit. This reasonably painlessly leads onto how the couple will achieve their goals, creating a helpful money conversation. Discussion around how the household will manage money, and if either partner plans to stay home with children can follow.
I am a big fan of the “fun money” accounts. This strategy limits spending but also allows both partners to spend guilt (and criticism) free.
I have assumed you will combine finances, but am aware that some keep separate finances and pay a share of joint expenses. If that suits you both that is fine, but you should be combining efforts saving and investing towards joint goals. Without joint goals, and a combined effort to get there, where is this relationship going?
In the event of a breakup, and financial separation, all couple resources generally go into the pot to be divided. So if you have diligently saved and invested during the relationship whilst your partner has blown their cash every month, you are at risk of losing a significant portion of savings in the separation. And if they have racked up thousands of dollars in credit card debt, there is a risk you could end up liable for that too.
A child’s financial habits are supposed to be mostly formed by the age of 7! This means they are absorbing information from a young age by observing your behaviour around money. Do you demonstrate a healthy, balanced attitude towards money?
The good news is, your kids don’t know money conversation is taboo. Financial literacy is one of the many skills children should learn as much as possible before leaving home.
Many of us will be in a similar situation, attempting to walk the fine line between making kids lives that bit easier financially, and avoiding spoilt, entitled kids who are relying on handouts from mum and dad well into adulthood.
Financial Education is a Better Gift than Cash Handouts
I am pretty shocked by how many adults receive regular handouts from their ageing parents. The fascinating Millionaire Next Door series makes it quite clear that this “economic outpatient care” actually hinders, rather than helps, the recipients financial success.
Of course, preparing your kids for managing their money as young adults doesn’t come as one big “Money conversation” before they leave home. It’s learned through thousands of micro-discussions, games and role modelling over the years.
- Explaining the ATM machine or credit card payment at the checkout involves taking money you have earned from your bank account. It’s not unlimited!
- Verbalising your money decisions. Weighing up pros and cons, delaying gratification, getting good value.
- Providing children with some money so they can learn by doing
- Role modelling intentional spending
- Conversations when school friends display consumerist behaviour
- Linking real world examples – explaining you are doing some extra shifts to pay for an exciting holiday
- Learning delayed gratification -Encouraging them to save for something they really want
- Giving to a charity that they can understand (we like Childfund for the personal connection with our sponsored child)
- Playing games – plenty of games that teach skills eg monopoly, game of life, cash flow for kids
- Explaining the difference between an asset and liability and the benefit of buying the assets first
- Helping them set up a good superannuation account with their first job, and helping them understand super
If your parents are good with money, they may have been a source of education and discussion over the years around saving, investments and getting a good deal. If your parents are pretty open with money, they are likely happy to discuss things like what they want as they get older.
How do they want their healthcare provided once they need more help? Have they organised a will and the right time to allocate an Enduring Power of Attorney for if they can no longer make their own decisions?
Many of our parents will find discussion about money unacceptable. They may even be concerned you don’t have the right motivations. Which makes the above conversations difficult to impossible to have.
Your peers are most likely to be in a similar money position to yourselves and so are most likely to be able to share information relevant to your needs, and vice versa.
But again, self-esteem, social status and security issues pop up so it’s best not to barge into conversations asking about your friends’ salary or savings rate.
The best way to approach money conversations with a peer is to offer information you have found. Perhaps you found a great deal on a mobile phone. Share this with your friend to open the door to them sharing similar information with you.
How to Have a Conversation about Money
Money conversation is still taboo. Yet we could all benefit from a little more sharing of financial information to get a good deal and avoid paying too much. Sharing our saving and investing habits can encourage those around to up their savings game.
Your wealth accumulation journey starts as soon as you make the first step. Subscribe to Aussie doc for a weekly email to keep you up to date on track to your goals.Aussie Doc Freedom is not a financial adviser and does not offer any advice.
Information on this website is purely a description of my experiences and learning. Please check with your independent financial adviser or accountant before making any changes