Retirement Life
2 June 2023

Your Money Mindset


The funny thing about money is that while we refer to it as cold, hard cash, it can elicit a wide range of emotions; happiness, fear, greed, anguish, envy, elation, to name a few. Our reactions to money depend on three primary factors: our current financial circumstances, the amount of money in question and our money mindset.


Long-term financial outcomes for lottery winners vary greatly, often due to differences in their money mindset. The amount people save over their working lives varies more than can be explained by income levels or family circumstances. Again, it is money mindset that matters.


The development of your money mindset starts in early childhood

The financial circumstances you’re born into play a part. Starting life in extreme circumstances – poverty or significant wealth – can have a huge impact, although not necessarily a predictable one. For example, living in poverty can create a ‘poverty mindset’ that leads people to believe that they are destined to a life of poverty and are not deserving of wealth. This can become a self-fulfilling prophecy.


On the other hand, a deprived background can make people more determined to achieve and maintain financial success. Money-related sayings can also influence how we think about our finances. We can all remember sayings like ‘money is the root of all evil’ or ‘money doesn’t grow on trees’. Hearing these repeated at a young age can influence attitudes and behaviour for a lifetime, particularly when you’re considering an impulse purchase!


Calculate what you could draw in retirement.

This will change throughout your life

Good or bad financial experiences also help shape your money mindset. Failed investments, failed businesses and failed relationships can all lead to a more cautious attitude towards money. The Great Depression was a significant influence on financial attitudes and behaviour for at least two generations. On the other hand, financial success can lead to a more confident approach with money.


Your money mindset changes throughout your lifetime. Typically, young people have a more carefree attitude towards money and treat it as something that is there to be spent to provide instant gratification. Bringing up a family can be financially stressful as most parents want to give their children the best possible standard of living, which is often just beyond what their incomes can sustain. At this stage, money is treated conservatively with an emphasis on lifestyle consumption.


Later in life, the accumulation of wealth provides a safe backdrop against which more financial risk can be taken. Some people take on new ventures at this stage, such as setting up a business or changing career. Then in retirement most adopt a more conservative approach because, of course, without a steady source of income, money lost cannot be easily replaced.


Values play a huge role

Core values are without doubt the most significant determinant of your money mindset. Respect, integrity and concern for others generally have a positive impact on your relationship with money. People who find pleasure in non-material things, like spending time with friends and family or outdoor pursuits may not become millionaires, but they generally have less financial stress and find it easier to save than those who aspire to a grand lifestyle filled with material possessions.


When erring on the side of caution may not pay off

The essence of your money mindset is reflected in two key attributes: your willingness to take risks and your desire to create wealth. If there is a mismatch between these attributes and your financial goals, it will be difficult to achieve financial success. A person who aspires to make millions but who is unwilling to take financial risk is unlikely to succeed. 

Project your retirement income.

Understanding your money mindset is therefore the starting point for any financial plan.


Photo of Liz Koh
Written by:

Liz Koh

Liz Koh is a money expert who specialises in retirement planning. The advice given here is general and does not constitute specific advice to any person.

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