People have bad money habits into their 30s, and it’s not just young people with zero credit card debt who need to break bad money habits, according to a new study.
Alcohol, binge drinking, gambling and hard drugs are also other common bad money habits in old age, the study says. The experiment of 13 to 70-year-olds found that people who had a bad money habit into old age were also more likely to misuse money and lose it, and were less likely to live a happy and well-adjusted life.
Worse, 35% of participants thought that money was as important as their health, self-esteem or relationships, says the study, by researchers at Indiana University Kelley School of Business, and published in the Journal of Consumer Research.
The experiment sent messages to teens, and older adults with an experimental psychology website, in the form of surveys and emails. The poor decisions that participants made included dishonesty, spending more than they earned, and having difficulty staying solvent.
While most of the participants experienced at least some bad money habits into old age, some began their behavior much earlier. About 1 in 10 people, pre-graduate age, had at least one bad habit before age 20. About 11% of them had two or more bad habits into old age.
Some of the bad money habits that young adults still held into old age included:
Gambling, spending more than you earn
Being irresponsible about what or how much to save
Paying for things they didn’t want
Nonpayment of bills
Worrying about money and being worried about money
The study authors looked at many other possible ways of thinking about money – from the “la-la land” thinking to socially harmful thinking – that might lead young adults to make bad money choices. But when people are young, “those who hold views related to ‘worst case situations’ and ‘gambling,’ are more likely to make harmfully chosen choices about financial affairs,” says the study.
Money continued to be a life-and-death issue for young adults until age 50. The poor choices they made seemed related to the implications of lack of money, or of what is not known about how money works or the ability to pay for insurance and the health-care system, the study says. The good news is that many of these poor choices can be corrected.
Among the types of decisions that many people – young and old – should stop making and stop making early in life:
Using credit cards instead of debit cards
Buying anything with a small amount of money
Storing property they can’t afford
Always thinking about money
Keeping money for later, when the decision is more difficult
Not saving for the future
Taking in someone for the price of a second home instead of looking at the benefit of the whole
Buying emotional possessions instead of logical objects
After observing hundreds of different decisions, these researchers concluded: “Although nearly all of these kinds of choices were influenced by the path of life and financial success in adults from young adulthood to the present, they all share some level of brain plasticity, and, therefore, can be adjusted with careful planning and awareness of the positive relationship between future savings and not only financial success, but also future happiness.”
So, what does it mean for a woman approaching her 30s to start protecting and planning for the future by talking about money? Here are some ideas:
Start talking to your financial adviser or financial adviser about how you’ll approach finances in the next few years. Get a clear picture of what your finances look like now and then let your adviser decide. There’s no substitute for a thorough plan.
But if you want to discuss serious money issues now (such as your life goals) with your adviser, don’t wait until you’re 30, 40 or 50 to start.