A Influences on the Role of Money
Personal attitudes towards risk and reward, borrowing, spending and saving vary from person to person is often referred to as their risk profile. This can be influenced by a range of factors.
Life stages such as childhood, adolescence, young adulthood, middle age and old age have an impact on our attitudes to money. For example in young adulthood you may be enjoying earning for the first time and living away from home so may be spending heavily on social life, holidays and items such as TVs. As you get older, you may wish to buy a house so may borrow a large amount of money for a mortgage. Later, you will become focused on providing for yourself in retirement and may start putting money away for a pension.
Culture has an impact on our attitudes and behaviour. What we see people do around us naturally influences what we do ourselves. As a result, in some countries people tend to save more than others. The impact of culture can also been seen on a smaller scale. If your family a big savers, it is more likely that you will be too.
Life events such as having a baby and getting married can be expensive and people may save heavily prior to spending. Other life events such as an injury or illness can be very unexpected and people may pay into insurance schemes just in case this happens.
External influences and trends have an impact on the way people spend. If there is uncertainty in the economy such as a recession or political unrest, people may be more cautious. Trends such as popular products may show a rise in spending but trends such as reducing consumerism, may show a reduction in spending.
Interest rates are the cost of borrowing and the reward for saving. Therefore when interest rates are higher, rewards for saving are higher and the cost of saving is higher. In which case, people may be more inclined to save and vice versa.
