According to new psychology research published in Financial Planning Reviewconsciousness appears to play a very important role in money management and wealth accumulation.
The findings show that more diligent, organized and hard-working individuals tend to have higher levels of wealth, even after taking into account other relevant factors, such as education.
To arrive at this indicator, the study examined the relationship between personality traits and a person’s wealth, measured by relevant conditions such as property, savings, investments and valuable physical items.
The researchers aimed to explore the influence of personality traits on wealth expansion beyond familiar demographic categories such as age, income, and education.
In an interview, study author Mark Fenton-O’Creevy, professor of organizational behavior at The Open University Business School and creator of the Emotional Finance blog, states:
“I became interested in the psychology of financial behavior while studying traders at investment banks and discovered how important personality and emotions were to trader performance.”
Understanding Personality Traits
In one of the indicators to prove their study, the researchers applied the “Big Five” personality model, a framework used to understand and measure people’s personality based on five main characteristics, which consist of openness to experience (curiosity and open-mindedness), conscientiousness (organization and responsibility), extraversion (sociability and energy), agreeableness (cooperativeness and empathy) and neuroticism (emotional stability).
Based on this framework, each person falls on a spectrum for each trait, and these traits help describe how individuals differ from each other in terms of preferences, behaviors, and emotions.
During the study, researchers performed a secondary analysis of a UK sample derived from two existing datasets.
The first survey provided personality measures, while the second assessed attitudes toward money and provided more detail on wealth measures and demographic variables.
The combined dataset also included responses from 3,240 participants.
From this data, the researchers were able to delve deeper into the correlations between personality traits, demographic variables, and wealth measures of property, savings, investments, and physical items. They were also able to conduct multivariate tests to determine the overall effect of the independent variables on wealth.
It was concluded that older people, with higher incomes, tend to have greater wealth. Gender and education also showed modest but significant correlations with wealth.
Regarding personality traits, conscientiousness was frequently positively related to all three measures of wealth, indicating that more diligent and organized individuals tend to have higher levels of wealth.
Surprisingly, conscientiousness had a higher correlation with measures of wealth compared to gender or education. The relationship was relatively weak with respect to education, although the factor had a positive and significant correlation with conscientiousness.
This suggests that awareness is likely to be associated with how money is invested and spent, although education also contributes to better paying jobs and is therefore also considered a deciding factor.
“We were somewhat surprised that personality became more important than education level in accumulating wealth”Fenton-O’Creevy told PsyPost.
“Although education has important associations with income level, it may be that conscientiousness is more useful in managing spending and being careful with savings and investments.”
Looking at the other side of the same coin, neuroticism was negatively related to wealth, suggesting that people with higher levels of emotional volatility and anxiety tend to accumulate less wealth.
The data also reveal that neuroticism was associated with success at work, an important source of income, in a very negative way.
The unstable nature of neurotic individuals can impair their ability to manage wealth efficiently and responsibly.
Serving as an aid to financial planners
Another finding made from the study was that extroversion had a modest but significant correlation with income. However, when it came to wealth, extroversion showed a modest but significant inverse relationship with savings and investments, but a positive relationship with wealth held in physical items and possessions.
This suggests that extroverts may be more impulsive in their spending and may make poor investment decisions. The researchers also found mixed results for other personality traits. For example, agreeableness showed some associations with wealth, but it was less consistent. Openness had mixed relationships with different aspects of financial behavior and outcomes.
The study’s findings could have direct implications for financial planners, advisors and government agencies. Understanding the relationship between personality and financial outcomes could help tailor financial services and advice to individuals’ needs.
Fenton-O’Creevy explains:
“No one should take away from this that if you want to improve your financial situation, you have to change your personality. Personality changes very slowly over the course of a lifetime. Instead, the insights from this study can help those who offer financial advice to tailor their advice to the personality of their clients.”
In summary, the study provided insights into the influence of personality traits on wealth accumulation, highlighting the importance of conscientiousness and the potential negative impact of neuroticism.
The findings contribute to the growing body of research exploring the role of psychological factors in financial behavior and wealth outcomes.
“Although this is just one study, the finding about the importance of mindfulness seems to fit well with other research and the sample size is quite good.”said Fenton-O’Creevy.
“However, a study like this is just a snapshot in time, and it’s hard to be sure whether the associations we find are causal. To do that, you need to collect data on the same people over several years.”
Finally, in literal Portuguese, this study is called “Personality and Wealth” and was written by Mark Fenton-O’Creevy and Adrian Furnham.
