How much do we really understand about our relationship with money and the power it holds over us? In The Psychology of Money, award-winning journalist and broadcaster, Claudia Hammond examines how everyday encounters illuminate our complex relationship with money and how a better understanding of it can help our wallets as well as our minds.
It starts early. Very young schoolchildren have little idea where money actually comes from or its true value - but they already know that it's 'special', clutching their piggy banks and purses. As we'll hear, they like the physical sensation of holding money in their hands (as do adults), coins especially, but even better for children, is chocolate money.
As we grow up our childhood experiences and circumstances shape our attitudes to spending. We place items into different "mental moneybags" to rationalise our purchasing decisions - from essentials to luxuries. These vary - reflecting class, gender and culture, so that one person's necessity can be another's luxury.
Many of us hate talking about money but there are awkward occasions when we can't avoid it - a situation which some people are able to exploit. Out for dinner with friends, having a great time? The food, wine and conversation flow freely - until the bill arrives: anxiety sets in. Splitting the bill evenly seems fair but what if you didn't have any wine or dessert and you picked the cheapest main course on the menu whilst others indulged? It seems sensible to keep the peace and pay up. That's what one of your fellow well-fed companions is relying on. Psychologists call this "the unscrupulous diner's dilemma". If you're the one who's always taking the extra financial hit for your "mates" then take notes to avoid coughing up.
Another pitfall for the unwary shopper is bargaining when you're not sure of an item's real value. The British are traditionally terrible at this - being too polite and not wanting to offend. Research shows that if you offer a low but realistic price first then the seller is forced to take that into account when making a counter-offer. It's called anchoring and plays on the fact that the initial bid tends to bias all other offers, irrespective of true worth.
In this programme, Claudia Hammond explores some of the latest research into the psychology and neuroscience of money and reveals some simple and effective tricks that can help us all.
Claudia Hammond explores our complex relationship with cash.