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Psychological barrier: How your ‘money mindset’ can impact on pension saving

January 25, 2024

From the joy of a windfall to the anguish of buyer’s remorse, there is no doubting money’s potential to influence our mood in positive and negative ways.

Indeed, you only have to look at the emotional impact of the cost-of-living crisis on many employees across the UK, with money worries exacerbating anxiety among large sections of the workforce.

As highlighted in a separate Vintage Corporate article, these circumstances also amplify the potential value that employers can deliver through a focus on financial wellbeing programmes, which can help inform employees about money matters and educate them on practical strategies and approaches to help keep their personal finances on an even keel.

Such programmes can deliver invaluable results, and knowledge is certainly power when it comes to managing money matters, but it is also worth noting the presence of more hidden barriers that can prevent employees from achieving a state of financial wellbeing. One such aspect is an individual’s ‘money mindset’, a term used to describe the internalised beliefs, sometimes established at a very young age, which can strongly influence someone’s relationship with money.

Underlying anxiety

A case in point is financial anxiety. In recent times, the higher burden of household costs has led to more people experiencing the strain of money difficulties – as underlined by a snapshot survey by the Mental Health Foundation, which revealed that almost three-quarters of the population (73%) felt anxious at least sometimes within the past fortnight and one in three (32%) said their anxiety was triggered by worries about ‘being able to afford to pay my bills’.

For some, however, financial anxiety is ever present. Irrespective of their immediate level of income or wealth, such individuals might still be panicked by the presence of a bill on the doormat or feel sick at the idea of checking their bank account. The reasons behind this can be varied, but they include growing up in a household where money was scarce or having your finances negatively impacted by experiences such as divorce, redundancy or bankruptcy. As previously mentioned, the instability of the current economic climate can also serve to amplify these feelings.

A potential symptom of financial anxiety is financial avoidance, where individuals actively disengage from their own money matters, often feeling that they have little control over them anyway. This problem appears to be particularly acute among younger workers, with research from Aviva suggesting that 60% of Generation Z and millennials are adopting a financial avoidance approach.

Financial self-esteem

Another potentially problematic money mindset relates to an individual having a poor perception of their own financial situation. They might not think, for example, that they have a level of wealth that justifies the need for long-term plans, and that savings and investments are the reserve of wealthier others.

One expert uses the term “money dysmorphia” to describe this situation, drawing parallels with conditions where you might worry about perceived physical flaws or compare yourself unfavourably with others.

Employees with this kind of money mindset can end up unwittingly adopting behaviours and making choices that hamper their chances of securing sound financial outcomes later in life. Indeed, one study has shown that as many as 13% of people don’t believe they have enough savings to engage with their pension and 12% don’t review their pension because they find the process overwhelming.

By putting your head in the sand, however, there is a risk of entering a vicious cycle. Essentially, avoidance results in financial hardship and associated feelings of shame that, in turn, encourage greater levels of avoidance and more intense feelings of shame. This is sometimes referred to as a financial shame spiral.

Stopping the spiral

One study provides evidence that a simple psychological trick can help break this loop. It found that participants who were asked to recall personal acts of kindness subsequently experienced a significant buffering effect on their sense of financial withdrawal. This points to the fact that a positive self-image can empower people to take a constructive approach to matters they might consider to be threatening or challenging.

Separately, it has been found that the ability to create a robust picture of your future self is a powerful force in encouraging longer-term planning and working towards financial goals, with a report from Aegon exploring this issue in greater depth.

It revealed that individuals with a more concrete vision of their own future are more likely to be a top contributor to a savings product such as a pension or ISA. Interestingly, this correlation was observed across the income spectrum, with lower earners making better savers if they were found to have a healthy money mindset.

Nurturing such an attitude is not necessarily easy, but financial wellbeing programmes give employers a powerful platform to support those struggling with financial anxiety or avoidance, delivering real value in terms of boosting knowledge, building self-confidence and helping create the right mindset for a better financial future.


The information contained within this communication does not constitute financial advice and is provided for general information purposes only. No warranty, whether express or implied is given in relation to such information. Vintage Corporate or any of its associated representatives shall not be liable for any technical, editorial, typographical or other errors or omissions within the content of this communication.