“Consider any individual at any period of his life, and you always find him preoccupied with fresh plans to increase his comfort.”
- Alexis de Toqueville, 'Democracy in America' (1841)
How would you answer the question in the title if you were talking to a curious six-year-old?
Six Year Old: What do people want from money?
Me: Well, the answer for almost everyone is more.
Six Year Old: Why do they want more?
Me: Because they believe it will make them happy.
Six Year Old: How much will it take to make them happy?
Me: Significantly more than they have.
Six Year Old: Why will that make them happy?
Me: Because then they can be free.
Six Year Old: What does it mean to be free?
Me: It's different for everyone. Also, no one really knows what that means.
Six Year Old: Why does no one...?
Me: Oh would you look at the time...we gotta get you to bed.
That didn't work out so well. Let's try beginning this article with numbers.
6.9% of American households make over $200,000/year.
41% of adults who make over $200,000/year have broken down and cried because they don't have enough money.
These households make more money than 93% of their fellow Americans, and yet almost half of them feel like money is something to cry over.
Why?
In "The Psychology of Money", Morgan Housel offers one explanation: the feeling of control.
"People want to become wealthier to make them happier. Happiness is a complicated subject because everyone’s different. But if there’s a common denominator in happiness—a universal fuel of joy—it’s that people want to control their lives."
Out of Control
Most people want more money in order to feel like they have control of their time, and therefore their life. In this respect, it doesn't matter whether you are a single mother working two menial jobs or a frazzled executive dealing with 9 hours of Zoom meetings every day. While each person struggles with very different problems, it's equally possible neither one feels like they control enough of their time.
This idea of wanting control comes across in the recent report "The Secret Financial Lives of Americans", by the firm NonFiction Research. In their questions, they asked people about financial guidance they would love to get from a coach or adviser.
The list is fascinating:
• Evaluating if they’re being paid fairly
• Maximizing their salary at their current job
• Planning career moves to grow household income
• Budgeting month to month
• Right-sizing their debt
• Planning affordable vacations
• Dealing with the spending pressures of status anxiety
• Having a holistic advisor to talk to about their entire financial life
Few financial institutions currently provide assistance with these issues. They represent huge opportunities for large financial institutions and savvy FinTechs to help Americans feel more in control of their lives while providing profitable services.
By focusing on increasing the feeling of control, product designers can uncover functional possibilities that take them far beyond the current limitations of most apps. Combine salary data with a simple chat experience, and you have a compelling way to help your customers better negotiate pay. Combine publicly available trip planning apps with a customer's financial data, and you have a vacation planning experience that no travel agent would be able to match.
The Social Dilemma
“I know a girl whose one goal was to visit Rome.
Then she finally got to Rome.
And all she did was post pictures for people at home.
'Cause all that mattered was impressin' everybody she's known.
I know a girl that saves pictures from places she's flown.
To post later and make it look like she is still on the go.
Look at the way we live."
- Drake, Emotionless
There's a famous story about a party where legendary authors Kurt Vonnegut and Joseph Heller were hanging out. Vonnegut jokingly informs Heller that their host, a hedge fund manager, makes more money in a single day than Heller had earned from his novel Catch-22 over its whole history.
Heller responds, “Yes, but I have something he will never have … enough.”
We live in an age when so many of our egos are intricately tied to the reaction a tiny image on a phone receives. I'm currently writing this article from a beautiful balcony restaurant in Laguna Beach, where my parents live. There's a couple at the next table from me, staring intently at their phones while they sip on cocktails. Twice now, the woman has gotten up to pose in front of the view to take selfies. She gives the camera a huge smile and then sits back down to edit the image, post the photo, and obsess over the likes she gets in real-time.
The experience is passing her by, but the management of external perceptions of the experience? That's going swimmingly.
I'm not writing this to express my superiority to this woman. None of us are immune to the pressures of social media. One of the main pressures we face is to look more financially capable on social media than we might be in our real lives. According to NonFiction Research, 28% of millennials admit to curating an online persona that is wealthier than the real-life version.
The repercussions are obvious. Credit card debt is at an all-time high; savings rates are at all-time lows. Almost 20 million Americans have a shopping habit that jeopardizes their relationships or careers.
"Americans have become like superheroes in reverse: heroes in public, with secret identities of normal people who break down into tears and struggle with money."
- Nonfiction Research
Financial education is currently no match for societal pressure. Again, this presents an opportunity for savvy product designers. By combining data and streamlined coaching services, there are hundreds of experiments in helping Americans live more responsibly just waiting to be run.
Morgan Housel shares a lesson that all six-year-olds should be taught to understand.
"When you define savings as the gap between your ego and your income you realize why many people with decent incomes save so little. It’s a daily struggle against instincts to extend your peacock feathers to their outermost limits and keep up with others doing the same."