Genetics and spending patterns

A recent study into what drives our spending behaviour revealed some interesting results, providing us with insight into our personal money choices, writes Maya Fisher-French

The paper titled Born to Spend? How Nature and Nurture Impact Spending and Borrowing Habits asks the following question: Are people who are good with money taught about finances while growing up, or are they just wired that way? The study was commissioned by the US-based Chase Bank.

The conclusion is that the make-up of our brain, which is genetic, has a lot to do with our money styles.

The paper describes an experiment that aimed to find out what drove people’s decision making. People’s brains were scanned while they were faced with healthy and unhealthy food options.

Those doing the experiments found that the differentiating factor between people who could resist temptation and those who couldn’t, turned out to be driven by different brain-region activity.

According to the paper, the prefrontal cortex is the region at the front of the human brain associated with slow thinking. The experiment identified two regions in this part of the brain.

The researchers called one region of the brain “V” and the other “D”.

They explain that everyone uses region V to make value-laden decisions. When we face a choice, region V lights up.

However, region D only lights up for people who balance health benefits against taste.

“This is because region D appears to modulate the activity of region V. Region D is like an internal voice, forcefully asking, as we think of reaching for a sweet treat, whether we need the extra sugar or would instead benefit by choosing a more nutritious alternative,” explains the paper’s author, Dr Hersh Shefrin, who argues that part of the reason in key situations the brain regions of some people light up but not others has to do with genetic differences.

What this tells us is that nature definitely matters for financial decision making, just as it matters for athletic ability and physical traits.

Shefrin says people with a particular gene variant appear to make better financial decisions.

“Because the same genetic variant is also associated with better learning, it is plausible that people with this genetic variant have learnt to be more financially literate than others, and to make better financial decisions.”

“This suggests that traditional financial education might only have a limited impact on financial behaviour.”

This is not, however, an excuse to go on a spending spree. The researchers also found that parenting around financial issues had a greater influence in younger people.

While genes explained about 33% of savings behaviour, parenting explains 40% to 50% of savings behaviour for 20- to 25-year-olds.

The parenting influence does decline as children get older, while the genetic influence is long-lasting and does not disappear later in life.

However, if as a parent you are able to influence the spending habits of a young person when they receive their first pay cheque, you are at least able to get them to make good financial choices early on. These are the kinds of choices that will benefit them later in life, such as not taking on short-term debt and starting a retirement plan.

So good parenting is still beneficial.


If you are one of those people whose ‘D’ region is seriously lacking, you need to be aware of your tendencies and put systems in place to protect yourself from your choices

Remove temptation
1 Just as you’re not supposed to have cookies and chocolate in your house when you are trying to lose weight, know that you are the sort of person who cannot have access to credit. Do not take out a credit card believing you will just use it for emergencies – you won’t.

Every time you see a gorgeous pair of shoes, it will feel like an emergency.

Commit to savings in advance
2 The save-more-tomorrow principle basically means you commit to saving with your next salary increase.

Researchers have found that if you ask people to save from their existing income, they will register it as a mental “loss”. However, if the saving comes out of a raise, it will not feel like a sacrifice.

Use online financial tools
3 Researchers have established that people who were more aware of their moneyand how they were spending it, tended to make better financial decisions.

Get a coach
4 A financial adviser can encourage you to save and will also act as a conscience when you are tempted to spend frivolously.

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