Finance | Culture

Personal Finance & Culture: How Our Cultures Shape Our Financial Decisions?

The impact of culture on personal finance & how to overcome it.

T.Cillian
3 min readApr 30, 2023

The financial decisions we make today affect our future well-being. Although we make decisions based on rational thought, culture’s role is often overlooked. However, it is crucial to our perception of money and how we spend it.

#1: Understanding Culture

person in traditional dress at the street.
Photo by Genaro Servín from pexels

“Culture is the arts elevated to a set of beliefs” — Thomas Wolfe.

It refers to a set of shared values, beliefs, practices, and traditions that define a group of people. It can be influenced by various factors such as religion, language, customs, history, and geography.

Furthermore, it is not limited to national or ethnic groups, as individuals may belong to multiple subcultures that can influence their financial decision-making.

#2: Cultural Beliefs & Values: How They Affect Our Behavior

Case Study 1: Affecting Spending & Saving Habits

A person from a culture that values social status and conspicuous consumption may be more likely to spend money on luxury items such as designer clothing, expensive cars, and high-end electronics, even if they cannot afford them.

In contrast, someone who grew up in a culture that values saving and frugality may be more likely to prioritize his basic needs and avoid unnecessary expenses.

Case Study 2: Affecting Investment Decisions

Cultural values can also shape investment decisions and risk-taking behaviors. For example, cultures prioritizing financial security and stability may be more conservative about investments. Investing in low-risk assets such as bonds and fixed deposits may be a good idea, even if the returns are relatively low.

On the other hand, cultures that prioritize risk-taking and entrepreneurship may be more likely to invest in high-risk assets such as stocks and cryptocurrencies, even if the returns are uncertain.

Cultural influences can also lead to biases and irrational financial decisions. An individual from a culture that values real estate investment may be more likely to invest in property, even if it is not the most appropriate financial decision.

Case Study 3: Affecting Debt Management

It can shape an individual’s attitude toward borrowing and repayment. For example, cultures that prioritize personal responsibility and self-sufficiency may view taking on debt as a sign of weakness and prioritize paying off debt quickly.

In contrast, cultures prioritizing upward mobility and social status may view debt as a necessary means of financial success. They may be more willing to take on debt, even if it requires a longer repayment period.

#3: Overcoming Cultural Barriers to Financial Success

person painted the face of a man.
Photo by Aneesh Ans from pexels

One of the most effective ways to overcome this consequence is to incorporate cultural sensitivity into financial education and literacy programs. This can involve recognizing and respecting cultural differences, addressing societal biases, and tailoring financial education to better meet the needs of individuals from diverse ethnic backgrounds.

“We were not taught financial literacy in school. It takes a lot of work and time to change your thinking and become financially literate.” — Robert Kiyosaki

Also, financial professionals and educators can help overcome cultural barriers by providing access to culturally appropriate financial resources and services. Also, offering financial products and services tailored to specific cultural needs & preferences.

Final Thought

If we can overcome cultural barriers to personal finance, the world may become more financially inclusive and equitable. However, if we do not, cultural biases may continue to impact financial decision-making, leading to unequal opportunities and financial disparities among different racial and ethnic groups.

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T.Cillian
T.Cillian

Written by T.Cillian

Just a writer who wants to leave a positive impact on readers through his words.💚