Remember always that money isn’t everything. But be careful to accumulate a lot of money before saying such nonsense.”
This quote is taken from Earl Wilson, an American journalist, and it is found right at the beginning of the first chapter of The New Psychology of Money by Adrian Furnham. Furnham does not reject or confirm this statement; he simply places it at the top of the page, among a few other quotes, which is a common practice among authors.
In The New Psychology of Money, Furnham calls our attention to the fact that there are very different perspectives on money, and he tries to bring the view of the diversity of the perspectives instead of prescribing one. If one follows that logic, probably Wilson’s quote, which probably has many supporters, sits in the right place.
The psychology of money is regarded as a relatively new subject among the various branches of psychology and is a topic that psychologists have shown interest in. Of course, it’s new in the sense of barely being half a century old. The term “psychology of money” or “Psychology of Money” rarely appears in books and articles before the 1980s.
Even if the term psychology of money has been mentioned somewhere, the content of the discussion has primarilybeen in the form of advice on getting rich. In this context, Furnham’s book is considered one of the exceptions. Please stay with Aseemoon.
The importance of the book Psychology of Money
Furnham points out an interesting fact at the beginning of his book: “Psychology proudly introduces itself as the science of understanding human behavior. But one of the subjects that has been almost entirely ignored is the psychology of money.”
Note that Furnham published the first edition of his book in 1998 when the term psychology of money hardly existed. He repeats this statement in 2014 in the second edition of the book. Interestingly, despite a decade having passed since the publication of the second edition, this claim is still more or less true. Just read Morgan Housel’s best-selling book “The Psychology of Money,” which has been published in recent years and sold with the heavy promotional pressure of websites and book bloggers worldwide, to see that books with the title “Psychology of Money ” still do not discuss the psychology of money.
Of course, over the past three decades, behavioral economics has grown well, and aside from academic research, authors like Daniel Kahneman, Richard Thaler, Dan Ariely, Andrew Lo, and Nassim Taleb have published numerous influential books in this field for the general audience. But even in behavioral economics, the emphasis has been chiefly on ” economics and economic models” rather than “humans and human behaviors. ” And if they have moved towards human behaviors, their focus has been chiefly limited to topics like risk and investment.
It should also be noted that Furnham is not indifferent to the works of his predecessors. For example, he indicates that Freud has addressed the meanings and associations of money in our minds, and behaviorist psychologists have conducted experiments on human monetary behaviors. In discussions on cognitive errors, examples of human monetary errors are usually referred to, and clinical psychologists have also probed into topics like gambling and impulsive behaviors. However, these works have mostly been conducted under the umbrella of other discussions, and the main focus of these has scarcely been on money itself. Therefore, it is scarcely possible to find an academic reference book in psychology where the word “money” appears in part of its table of contents.
A partial list of contents in the book “The Psychology of Money”
Since this book is one of our course materials in the complementary psychology of money lessons, we do not intend to go into the details of the book content, or we do not want to provide a summary of “The Psychology of Money.” However, to make you familiar with the atmosphere of the book and to let you know what topics Furnham has included in his book, below we list some of the most critical discussions presented in the book.
History of Money
Furnham discusses the history of money very briefly and succinctly in just a few pages. Naturally, from a book on the psychology of money, you shouldn’t expect a review of the history of money like an economic book.
He talks a little about barter and commodity money and then moves on to the meaning of money for humans. Unlike economists, Furnham sees money as more than just a tool for storing and exchanging value. He says that it is enough to pay attention to political changes, revolutions, and changes in governments. Governments change the design of coins and banknotes as quickly as they change postage stamps.
Furnham advances the discussion of the history of money from coins to banknotes and banks, and then talks about credit banks and millionaires. He also points out that today, given the role of financial institutions in the economy, if we want to talk about the psychology of money and people’s views on money, we must also consider people’s views on financial institutions. In other words, questions like “What do you think about money?” are not enough to understand people’s mindset about money. We must see how people understand institutions like banks, central banks, and the stock market and what views and attitudes they have towards them.
Two Approaches to Money
Furnham opens another significant debate in his book: money as a tool versus money as a drug.
If we see money as a tool, our approach is much like that of economists. A tool for saving value. For purchasing and selling. For making payments and transferring purchasing power (when a person gives money to another, he transfers his purchasing power to him).
But money can prey upon our brains. It can make us feel happy, sad, or excited. Change our risk-taking and confidence levels. It can become addictive. It can lead us to do things we wouldn’t normally do. Or as Furnham puts it (paraphrasing): “The dream of unlimited money can encourage people to behave recklessly.”
In this second approach, money is more like a drug than a daily tool. It is precisely this perspective that opens the door for psychologists to better examine the effects of money on the human mind, emotions, and behavior. From this perspective, one could say that one of the roots of the psychology of money is the science of biology (as is true for drugs). Consequently, one could say that part of our perspective on money is related to our genes and traits inherited from our parents.
It should be noted that Furnham had the privilege to see Hans Eysenck up close and to be his friend and sometimes colleague. Eysenck was a strong supporter of the role of heredity in human personality traits, and Furnham—who admires Eysenck—also believes that heredity is one of the factors influencing our money habits and behaviors.
Money and Happiness
Another area that Furnham discusses in the psychology of money is how it relates to money and happiness. He has summarized, reviewed, and analyzed many studies carried out in this area.
Furnham does not accept the idea that “money doesn’t buy happiness.” He recalls several studies indicating that money and income must exceed a certain threshold for their relationship with happiness to become insignificant. In families that are economically weak and in countries with weak economies, money can indeed bring happiness, and such a statement should not be applied to them.
He also discusses other factors like gender, age, culture (including the degree of individualism), religious beliefs, and individual health, teaching his readers through various studies not to easily reject or confirm claims about the relationship between money and happiness.
Money Beliefs, Attitudes, and Behaviors
Furnham has developed monetary attitudes measurement and conducted many studies even prior to the publication of The Psychology of Money. From his point of view, the examination of attitudes towards money and the kinds of beliefs that people hold about money is one of the pillars of the psychology of money. For instance, if they pursue money for safety or freedom and flexibility regarding their life choices.
He also finds the role and seriousness of the environment important, and based on many studies, he explains that family, school, and society play a great role in forming human monetary scripts and behaviors.
Introducing Children and Adolescents to Money
The chapter about the psychology of money in the area of children and adolescents by Furnham is one of the most valuable places in the book. Namely, this is the section that most reviews and gives a short insight into some of the related articles and research in this field, and, at the same time, this is a good roadmap for further studies. In other words, it points out which topics, questions, and ambiguities are not yet fully clarified and that need more study and research work.
Furnham discusses very interesting issues in this section. For example, when do children become familiar with the use of money and the concept of money, and when do they understand the function of financial institutions? It is very different if the child is aware that he can buy candy with his money or if it is important that he knows what a bank really does. It is not simple for a child to understand the concept of saving, earning interest, and taking out a loan. Additionally, it is not simple for children to understand that a bank is a profit-seeking institution that, in turn, also tries to earn a profit.
Furnham has, so far, discussed differences in understanding the monetary issues and relationships of children in developed and developing countries. Namely, he has also expressed hope that special research will be conducted in Islamic societies in order to understand better and analyze the role of cultural factors in determining the age and extent of familiarity with money and its related concepts.