Financial control gives people more happiness than a large salary, study shows

News - Banking

Written by Ray Clancy

Wednesday, 16 June 2010 12:00

Money doesn’t buy happiness but financial control does as it raises self esteem so that those with sensible financial plans are happier overall, a psychological study shows.

Happiness, wellbeing and overall self esteem are influenced by our sense of financial control and not by what we earn, according to the study published today (Wednesday June 16) by Aviva.

The Feel Good Insight Study, produced in conjunction with a leading psychologist at City University, London, indicates a strong link between financial behaviour and self esteem but proves money doesn't buy happiness. It found that those with sensible financial plans in place are happier overall and have a stronger sense of financial wellbeing, regardless of their salary.

In fact, more people earning over £50,000 have below average self esteem, 22%, than high self esteem, 12%. Similarly, the study shows that good health is seen as twice as important, 85%, as earning more money, 42%.

Currently two thirds of people in the UK have good or high self esteem. Through its study, Aviva discovered that 85% of those with high self esteem also feel in control of their finances and nearly half are happy about their financial situation. In contrast, 70% of those suffering from poor self esteem don’t feel in control of their finances and consequently, no one in this group feels happy about their financial situation.

The study found that around two thirds, 68%, of people with high self esteem are good at planning their day to day finances and a similar number, 62%, have set themselves clear financial goals for the long term

Over three quarters, 76%, of people with poor self esteem fail to plan for the long term and as many as 69% worry about managing their finances on a daily basis. And 85% of people feel being able to afford the essentials in life is very important to achieve happiness while 42% of people with low self esteem say they fail to stick to a budget.

The study also looked at levels of understanding, frequency of thinking about money and sources of help and advice. It found that the majority of people, 86%, worry about money at some point. Some 34% think about their financial situation at least once a day and 2% every minute of the day.

It found 52% of women feel overwhelmed by the quantity of financial information they see and only 12% say they understand complex financial products such as pensions and investments.

Overall 5% of UK adults admit they don't have any understanding of financial products, rising to 16% of those with poor self esteem. A quarter of people who have a credit card do not know their outstanding balance and feel out of control with their debt. And 30% of people who have a pension do not feel confident that they have the right pension provision in place.

‘It's a widely held belief that financial stress has an impact on overall health and happiness. Through this study we now know that there is a direct correlation between money and self esteem, and one that is unrelated to salary, employment status or age,’ said Dr. Malcolm Cross, Reader in Psychology at City University London.

‘Having the financial services industry understand the causes of fear, stress and anxiety around money is a key step to improving people’s financial situations and, in turn, their self esteem and happiness,’ he added.

‘This study shows a strong link between financial behaviour, self esteem and happiness, and proves that those with sensible financial plans in place are happier overall. By understanding the psychological impact of money and by helping people to face their financial fears, we can hopefully pave the way to happiness whatever their bank balance says,’ said Gary Price, marketing director for Aviva.