Our psychological make-up plays a part too, according to a study. Researchers found that those who were good with money tended to be more optimistic, and less impulsive.
They were also more likely to have what psychologists describe as an “approach goal orientation”. These are people who are comfortable with pursuing new activities and who like to expand their horizons.
The opposite outlook is known as “avoidance goal orientation”, where people tend to behave in ways aimed at avoiding failure, and where they stay away from potentially uncomfortable situations.
And they tended to believe they had control over their life - rather than being at the mercy of something outside themselves, such as chance, fate or God. This is known as having an internal locus of control.
ING behavioural scientist Nathalie Spencer, who was part of the research team, said the study was one of the first to look at such a wide range of psychological factors and their effect on financial capability.
It comes at a time when, according to ING International Surveys, three in 10 people across Europe have no savings whatsoever, and 10 per cent with personal debt don’t even know how much they owe.
“The findings in our research illustrate that improving financial capability is not solely about providing more information or changing people’s attitudes,” said Spencer.
For the study, the research team questioned a nationally representative sample of 800 people in the Netherlands.
First, they asked them questions about how they manage money, such as “sometimes people find that their income does not quite cover their living costs. In the last 12 months, has this happened to you personally?”
Then they surveyed participants on their financial knowledge and attitudes towards money. For example, they were asked if the risk of investing can be reduced by buying a wide range of shares, and if they agreed with the phrase “money is there to be spent”.
These were followed by questions which measured the psychological characteristics of optimism, non-impulsiveness, approach or avoidance goal orientation, and locus of control.
The research team say the findings could now be used to develop products to help people make the right money choices for them as individuals. For example, an app could prompt people to complete a personality questionnaire and then provide personalised tips on overcoming their own biases to better manage their money.
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This article is related to the ING International Survey: