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Avoidance Comes with Financial Anxiety

Knowing how to budget or invest one’s retirement savings are useful skills. But managing money isn’t just about what you know – it’s also about how you feel.

That’s the gist of a handful of recent studies into a newly identified emotion known as financial anxiety. These early studies look at two things: 1) is financial anxiety real?; and 2) does it explain why people do things like avoiding money issues or going into debt to paper over their financial problems?

The evidence says yes to both questions.

A 2012 study established financial anxiety as an identifiable psychological condition that can be measured using a standard psychological test. The researchers gauged their subjects’ reaction times to pairs of words flashed on a computer screen – negative financial words (debt), positive financial words (jackpot), neutral financial words (bank), or anodyne control words (camp). The subjects were timed on how long it took to identify a word after an on-screen icon replaced one word in the pair.

When only the negative financial word was left on the screen, people with higher financial anxiety were slower to respond than when only the positive word was visible. The prevalence of longer delays for negative words suggests that most subjects had at least some financial anxiety.

Researchers dived deeper into how financial anxiety influences behavior in another exploratory study that was awarded the Financial Therapy Association’s “outstanding research paper” at its 2014 conference. This study found that people who had lower anxiety levels – and, counterintuitively, were more physiologically aroused – were more open to seeing a financial planner. Some researchers had assumed the prospect of dealing with financial issues would elicit a “flight” response, but the study indicates that arousal can spur people to positive action. On the other hand, people with higher anxiety who were less aroused were less likely to seek help – similar to the avoidance behavior exhibited in the word experiments.

Further study is needed, but the researchers conclude that financial planners “should not expect those who are experiencing longer-term financial anxiety to enthusiastically demand planning services.”

In fact, they’ll probably avoid it.