- Money can trigger powerful negative emotions in relationships involving control, respect, power, inadequacy, and self-worth.
- Financial insecurity remains a significant source of tension and conflict in romantic and family relationships.
- Couples should strive for alignment on preferences, alternatives, and financial goal setting and seek consistency in daily financial decisions.
It is no secret that there is a psychological dimension to money. How each of us thinks and feels about money as a medium of exchange or financial capital impacts our behaviors with it.
Money is a source of pride or comfort for some and guilt, stress, or shame for others. And since 70 percent of the U.S. are currently married or partnered (Pew Research, 2022), conflict in relationships seems inevitable. Since each of us brings into a family or romantic relationship different perspectives and values, financial conflicts are inevitable.
Money has been connected to our collective conscience since the beginning of time. It is what allows economies to work, people to thrive, and communities to grow. Financial capital is a source of power and a goal for many people who strive for wealth or financial freedom (Langabeer, 2022). That is why money has been the major source of conflict and wars–over oil, opium, spices, or land–since the beginning of time.
For these reasons, money is also highly problematic, both for individuals and couples. In a recent APA survey, 55 percent of Americans reported that they agree or strongly agree that money is a major source of conflict in their household. The same report suggests that stress over finances is at its highest level in nearly a decade (APA, 2022). Post-Covid, we are seeing financial insecurity reach new highs as layoffs from big companies such as Amazon shake stock markets (WSJ, 2022).
Financial Psychology Theory
The psychological effects of money vary by person and society. Several theories partially explain the psychological impact of money. The social or economic exchange theory suggests that people use money as a form of reward or punishment in relationships. This can create power imbalances or struggles and feelings of insecurity or inferiority.
Another theory, the evolutionary psychology perspective, suggests that money is associated with survival and security, which can lead to feelings of anxiety and stress when money is scarce. Learning theory also implies that we adopt our attitudes and beliefs from our parents or social environments. Others have suggested our attitudes toward money are primarily derived from scripts or dialogues adopted from our family upbringing (Marter, 2021).
However we look at it, two things are apparent–at some point, partners will have conflicts over money, and the ability to safely navigate those conflicts will dictate the health and tenure of that relationship.
Financial Anxiety and Disparities
Money differences will emerge, in how two people believe they should be allocating their budget, or how much to save, for instance. Or in how much debt to take on for cars or houses. Or how much of current income to spend today versus invest in the future for retirement.
Some of the most common reasons for divorce include communication and relationship quality issues, but money disagreements are right up there. Things like unemployment or job loss cause significant stressors in a relationship. Other times, emotions are triggered in one spouse that might lie dormant, such as issues with perceived worth or inadequacy, such as a power imbalance between salaries of the partners, or issues related to control. Mistrust and resentment are common emotions.
Given money's powerful psychological impact on our relationships, understanding its effects can help us build stronger and healthier relationships. The key is to find financial intimacy.
Financial Intimacy and Fidelity
When we think of intimacy and fidelity, we think of building closeness and togetherness. Financially speaking, this is just as important and involves both partners being honest and open about their beliefs and behaviors, including sharing information about income, expenses, debts, and investments.
It is common in relationships that one person secretly has opened a bank account or snuck in purchases using different forms of payment so that the other spouse wouldn't know about it. Couples practicing financial fidelity can cultivate a sense of trust and understanding. Keeping money matters separate is often seen as a solution, but it too comes with issues of transparency and equity. Cultivating financial fidelity helps to level the playing field in financial choices and can help reduce stress and tension related to money.
From a decision-making perspective, there are some keys to reducing money conflicts. For instance, consider your relationships as a negotiation where both parties are designed to win, rather than one winning and one losing. Conceptually straightforward but not as easy to implement. To do this, you have to clearly communicate and understand each other's preferences and utility, such as your short- versus long-term goals, use of money, and priorities. You should also jointly brainstorm, share alternatives, and explore options that maybe neither of you had thought of. It is also helpful to discuss best and worst-case scenarios involving money. This can help alleviate a lot of stress and anxiety.
From a humanistic theory perspective, we must understand what gives meaning to both partners related to finances. Building self-awareness to recognize what triggers your thoughts and actions. But so too is awareness of others. Financial mindfulness can also help, which involves being conscious of spending habits and aware of the psychological impact of money. These can help you be more understanding and patient with yourself and others.
By understanding the psychological impact of money on relationships, couples can take steps to create a stronger foundation and balance for their relationship. Practicing financial fidelity, setting financial goals, and adopting mindful, healthy financial behaviors can help couples build a secure and trusting relationship. If you think you might have potential issues, consider a financial therapist or counselor who can provide guidance and support to help navigate the complex psychological emotions attached to money matters.
American Psychological Association (2022). The 2022 Stress in America Survey. Full report available at https://www.apa.org/news/press/releases/stress.
Langabeer J (2022). The Quest for Wealth: 6 Steps for Making Mindful Money Choices. Routledge Press, New York, NY.
Marter, J (2021). How Your Parents' Beliefs About Money Affect You. Psychology Today, August 28, 2021. Available at https://www.psychologytoday.com/us/blog/mental-wealth/202108/how-your-p….
Pew Research Center (2020). Nearly Half of U.S. Adults Say Dating Has Gotten Harder for Most People in the Last 10 Years. August issue. Available at https://www.pewresearch.org/social-trends/2020/08/20/a-profile-of-singl….
Williams-Alvarez J (2022). Layoffs Create Pitfalls for Finance Executives Looking to Cut Costs. Wall Street Journal, Nov 29, 2022. Available at https://www.wsj.com/articles/layoffs-create-pitfalls-for-finance-execut…