The Taiwan Banker

Financial psychologist Brad Klontz recently wrote an interesting book, Money Mammoth: Harness the Power of Financial Psychology to Evolve Your Money Mindset, Avoid Extinction, and Crush Your Financial Goals. He said that when it comes to money, many of us are still stuck in the Stone Age, and have not advanced since our ancestors hunted mammoths 400,000 years ago. Research has shown that humans are fundamentally unable to handle money properly. Our DNA forms “money scripts” which explain why it is so difficult to save or not overspend. This argument may require more evidence, but from a certain perspective, it shows why some people have deeply-rooted difficulties in money management. TABF’s Taiwan Financial Lives Survey 2024 introduced focus group interviews for the first time. In cooperation with Shi Hsin University, we invited the financially vulnerable in for interviews. Several maladaptive behaviors were mentioned, including chasing quick returns, using credit cards to earn points, difficulty understanding one’s finances, insufficient insurance planning, and overreliance on borrowing. The financially vulnerable are not even necessarily made up of lower income individuals, as one might think. We also interviewed an engineer from Hsinchu who borrowed millions of dollars in pursuit of quick money, and ended up with heavy losses. From the perspective of money scripts, these behaviors betray an inner uneasiness and a lack of knowledge and understanding about money. For example, interviewees explained their pursuit of quick returns by the slow speed of existing channels. To “get out of poverty,” they would need to invest where they thought could make money quickly, such as in virtual currency trading or stock hedging, ignoring the high risks of such products. On the other side of the spectrum, meanwhile, some dare not invest, afraid of losing their money. These actions reflect the mentalities and behaviors of the financially vulnerable, which our financial education should strive to improve. Fortunately, thanks to cross-sector efforts, the rate of high financial vulnerability has dropped from 20% in 2022 to 2.6%, while the proportion of those who self-identify as mildly financially vulnerable has increased from nearly 50% to 78%. Although the proportion of those who consider themselves financially secure has also decreased, the overall proportion of those who believe they are financially healthy trended upward. Nevertheless, going back to the money scripts mentioned above, as long as there are still people who do not understand and are afraid of finance, and thus show NG behaviors in money management, our financial education still needs to be improved, involving joint efforts wherever possible by financial institutions, educational institutions, and the government. On another note, following years of hard work, the Taiwan Banker magazine has been included as a member of its international financial media platform Factiva, reflecting recognition by the authoritative financial media Dow Jones. In the future, any member of Factiva can read this magazine. I would like to express my gratitude to all colleagues and authors, past and present, for this achievement.