This Monday, I was featured on the Marriage, Kids, and Money podcast (of which I don’t have 2 of the 3, and arguably don’t have the third…), and one of the questions came up for my girlfriend about how much we talk about money.
Her answer was along the lines of how often aren’t we talking about money.
Recently though, as her entrepreneurial efforts haven’t been going as planned, our money talks have not been present in our relationship.
This got me thinking about why people talk or don’t talk about money… and I think I have the “why” solved.
Why People Don’t Talk About Money
Why don’t people talk about money?
Naturally, people like talking about things they are good at, things they have, or things that they know how to talk about.
Unfortunately, many people don’t know a lick about personal finance and money, and as a result, aren’t comfortable talking about money because they might sound dumb.
Back in 2015, a research team at Wharton published a paper called The Economic Important of Financial Literacy: Theory and Evidence.
In it, they propose and show that there are 3 main questions that can show a person’s level of financial literacy:
- Suppose you had $100 in a savings account and the interest rate was 2% per year. After five years, how much do you think you would have in the account if you left the money to grow?
- More than $102
- Exactly $102
- Less than $102
- Imagine that the interest rate on your savings account was 1% per year and inflation was 2% per year. After one year, how much would you be able to buy with the money in this account?
- More than today
- Exactly the same
- Less than today
- Is this statement True or False? Buying a single company’s stock usually provides a safer return than a stock mutual fund.
How did you do?
In the paper, only 34% of participants were able to answer all 3 correct. (The correct answers are more than $102, less than today, and false).
Admittedly, these questions are quite tricky, though I think this is just one piece of the puzzle…
People don’t talk about money because they don’t have it
Here are a few statistics about the personal finance situation in the United States.
- 59% of Americans could not cover an unexpected $500 bill.
- 69% of Americans have less than $1,000 in their savings account.
- The average American has around $250,000 in various debts.
All of these numbers lead to the conclusion that on average, Americans don’t have much money, and as a result don’t really want to talk about how to get better financially.
It’s more fun to talk about things we have versus things we don’t have!
People don’t talk about money because they don’t know how to talk about it
I’m not a financial expert, and while I’ve been studying personal finance for the last 5 years, I’m still a long ways from getting there.
Just look at a list of financial terms that banks, financial institutions, and money managers use for their products:
Acronyms, terms that seem made up, and hyphens – oh my!
Unfortunately, the golden rule is “(s)he who owns the gold makes the rules” and many of these companies and institutions want YOUR gold (money).
As a result, these complicated terms are introduced to confuse and complicate matters – and many people don’t know where to even start learning about personal finance.
We’ve figured out the WHY but not the solution
I see this in some of the personal finance circles I’m in: “How can we get other people to talk about money?”
Getting people talking about money is something that cannot and should not be forced.
While I think I’ve figured out why people don’t talk about money, I haven’t started to think about the solution.
Maybe the solution is to ask questions like:
- What’s your relationship to money?
- Has anyone taught you anything about money in the past?
- Do you know where your money is going each month?
With research, understanding, and growth, it’s sometimes good to just understand where you need to start and then you can start working from there.
It’s a fact that human brains are INCREDIBLY POWERFUL. I believe that if a thought can be sparked, answers will come to whichever questions are asked.
Readers: do you talk about money? What’s your relationship with money? What do you think is the solution?