From frugality to risk-taking: How culture influences financial decisions
Many different factors affect our financial behaviours. Family influences and cultural norms can define whether a person is more likely to save cautiously or be a bold risk-taker.
Understanding these different pressures can help families make better-informed decisions about household finances, leading to improved financial health.
Culture and modern financial behaviour in the UK
In recent years, the financial landscape in the UK has been changing rapidly. The way the younger generations invest is unlike anything seen before.
The prevalence of AI, as well as social media and so-called ‘finfluencers’, has meant that professional advice is often bypassed in favour of quickly digestible information. This could be about simple topics such as the best credit cards for building credit, to how to diversify an investment portfolio.
Whilst these tools are helpful, professional advice is always the best route for protecting your financial health.
Collectivism, support networks and financial boldness
A great deal of how an adult behaves is down to their upbringing. As such, families are huge influences in all areas of life, including how finances are managed.
Having a strong familial support network can foster greater financial risk-taking. This is because you feel safe in the knowledge that you have a safety net regardless. The same can be said about community support too.
However, those who favour more individualist lifestyles may be more cautious with their hard-earned cash, as there is no backup if something were to go wrong.
How life experiences shape financial attitudes
Research has been conducted to support the idea of support networks vs. individualism. Durham University has found that those who have lost a parent during childhood are significantly less likely to invest in the stock market.
This could be due to internalised trauma, creating a natural cautiousness about taking risks. Also, the safety net feeling that comes from family support doesn’t exist for these individuals, making investing feel riskier than it may for others.
Shifting cultural norms
There has been a lot of examination into the broader financial culture within the UK. The FCA, for example, has made changes to its conduct standards. By asking financial institutions to follow this new code of conduct, any misconduct such as harassment, bullying or violence now falls under the regulatory scope.
The aim is to create healthy workplaces as well as deepen trust between consumers and financial institutions. By fostering this relationship, more people may seek financial and investment advice, widening the economy.
