The food, the religion, the language, the celebrations... are a few of the most common elements that we consider when describing a culture. However, I would also include another one that is often overlooked:
The way we manage our money.
I grew up in Mexico City. A city that was once the most populated city in the world. The majority of information I received about personal finance was from my parents. While their intentions were always the best, the information I was passed on was not really actionable. Probably, at this point, many will agree on this regardless of your cultural background.
We can all agree that the lack of financial literacy is a global issue.
However, now that I work with professional global citizens in this Asian region, I get to hear stories from people from all over the place. Each encounter is different as everyone has their own life-goals, background, experiences, etc. Yet, it has given me a good idea of their approach toward money-topics based on their cultural background.
Money is a human invention. Then, there is no surprise that there is a cultural element adhered to it.
What's your money story?
We tend to look at money as a raw element. We either have savings or we don't, right? Numbers don't lie.
However, this is a simplistic approach as each number has a story behind it. The important aspect is to unveil each of those stories that are reflected in our bank accounts, investments, or any other financial assets.
If we use a cultural-lens to understand the way we look at money, it will allow us to readjust and take positive steps towards our goals. Some of the main elements to understand our money story are:
Family background
Our family has an influence on many of the life choices we make. This can be in a direct or indirect way.
In terms of the money topic, this influence can take the form of the way our parents talked about money at home. Whether that was by openly sharing the house financial situation, avoiding the topic, constantly worrying about it, and using phrases like "money doesn't grow in trees", or any other form.
Also, any experience with a high impact such as "losing all my money in the stock market" that you hear from an uncle will influence the way you may approach certain investments and your view might be biased.
Money-Language
We know that language is a cultural element. The way we talk about money reveals the way we approach our personal finances.
"Investing is gambling".
"If I earned more, then I could save."
"We can't afford to invest."
Phrases like these above can show if someone is afraid of investing because of a lack of knowledge, stress or anxiety about the topic, or any other personal circumstance that usually has a negative effect on our money choices. Also, metaphors in different languages give a hint on how we tend to look at money.
English: Time is money.
German: Money is time. (Geld ist Zeit)
Personally, one important aspect that I would love to see more is family inclusion when discussing the house's financial situation. Yes, that includes kids too. The earlier they learn, the better they will be prepared in the future.
Historical elements
The financial sector has been always seen as an archaic system run by dinosaurs that do not want it to change. In certain areas, it still is that way.
However, in the past few years, there have been major developments that allow places like China and Sweden to be practically cash-less societies. Personal loans are no longer limited to banks, now there are also loans from peer-to-peer platforms, and more.
Regardless of all of these technological developments, our past still has a cultural print that cannot be easily removed. Chris Dillow summarizes how our culture influences our money decisions by sharing examples such as how nations with Confucianist values tend to save more compared to cultures that come from a slave or colonial history.
Community
Our community can have a strong influence too in the way we make money decisions.
If all our friends tend to go shopping, travel, and get the trendiest gadgets; we may feel the social pressure to keep up with that disregarding the financial impact. Also, if our closest relationships invest only in one type of asset, we will be most likely to be drawn to take a similar step.
However, when it comes to money decisions we should be more cautious and not just follow the herd as this can have an important impact on our lives.
Nation-approach to money
Spanish love 'bricks'. Chinese and South Africans are great savers. Germans can't be bothered to own a home.
These are oversimplified descriptions, of course. I am also aware that stereotypes fail to describe a nation as a whole. Especially when we think that China has over 1.4 billion people and by saying that Chinese are great at saving, I'm implying that the majority of them will be while that is not the case. However, it is important to look at stereotypes as a tool to group information based on repetitive elements.
Anyway, back to the main topic.
Different historical elements will lead to certain nations to collectively opt for specific financial choices. Let's take the example of Spanish citizens where 80% of families in Spain own a property. That's a big difference compared to Germany where only 51% own one.
I frequently have financial consultations with Spanish citizens and owning a property is one of their top priorities. A property is a tangible asset and "easy" to understand compared to other financial instruments. These factors give them peace of mind and also a feeling that their investment is safe. However, that is not always the case.
The 2008 house-price bubble in Spain, where prices plummeted more than 25% from its peak, proves that the "real estate value always goes up" saying (something that I hear a lot) is just a myth. Real estate and any other asset classes have cycles. Up and down. Nothing is 100% risk-free. However, it is not easy to simply go against the common trend.
What can I do?
One thing that is important to notice is that these elements are just guides to understand the reasoning behind why we have (or haven't) taken certain financial choices. Now, what matters is that we all TAKE CONTROL of our money story, as Rianka Dorsainvil explains in her article 'Why We Can't Talk About Money Without Talking About Culture'.
Take control of your money story.
These elements are important but they do not dictate our future or the way we should manage our money. Many of those apparently obvious money choices that our parents or grandparents took made sense at their time and under their circumstances. You are now on your own path and the world has changed in many ways.
The first thing you should do is to decide what is the life you want to live and based on that create a money-strategy that makes sense to YOUR situation.
Thanks for reading! 🥑
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