What donating blood tells us about money
This guest blog was written by Chris Budd, who wrote the original Financial Wellbeing Book as well as The Four Cornerstones of Financial Wellbeing. He founded the Institute for Financial Wellbeing and has written more than 100 episodes of the Financial Wellbeing Podcast.
Financial planning is really very simple. You just work out what you want from life, then spend your money on that.
The trouble is, working out what you want from life can be extremely difficult. There are many reasons for this, many distractions that tempt us to behave in ways that are actually counter to our wellbeing. This is particularly true of our relationship with money, our financial wellbeing.
Constructing a financial plan to make you happier, not just wealthier, can therefore be complicated. How we see money and wealth can itself create barriers to wellbeing. Becoming aware of this can help you make better financial decisions and therefore create a more effective financial plan.
The blood donors
Academics in Canada wanted to understand how money might affect one particular aspect of our wellbeing.
Having something purposeful in our lives is a significant contributor to long-term wellbeing. This might involve helping coach your child’s sports team, volunteering for the local school PTA, enjoying being creative, or perhaps helping out at a charity. Kindness and purpose bring joy.
In order to look into this bit more deeply, the researchers set up a blood donor clinic and placed an advert for people to come and donate blood. They then randomly divided the respondents into three groups and sent each group an email giving the date and location of the clinic.
To the first group, they included in the email a note advising that there would be $50 for the recipient if they turned up to the clinic. To the second group, they said they would give $50 to charity if they turned up. To the third group, they said there was no payment involved.
From which group do you think most people turned up on the day? Intuitively, we might think that it was the group who were going to be paid.
In fact, the group to whom they offered a payment showed the lowest turnout. The charity donation was second, and the highest turnout was from the group to whom they gave no money.
Purpose and money
Why is this? Giving blood is not something that you do with the expectation of payment. It is a purposeful act. It is something you do because you are doing good for others.
Offering payment for something purposeful gets in the way. It makes it about the money, not about the purpose. As a result, people are less inclined to get involved.
The relationship between money and purpose is a complex one. For example, achieving a certain level of financial independence might allow someone to change their job to one that is lower paid, but more purposeful.
Your financial plan
You might like to talk about this next time you meet with your financial adviser. What is your financial plan designed to enable? If the answer is only in financial terms, such as a bigger house, then perhaps a conversation about purpose and wellbeing may be helpful.
Perhaps your financial plan considers life objectives, but only in very broad terms, such as enabling you to retire at a certain age. Again, a conversation about how purpose will feature in your retirement may be useful.
Financial planning is, of course, not actually very simple. However, it can help you discover what will bring long-term wellbeing to your life. And that must surely be a worthwhile exercise.
Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.