Many Americans live in a perpetual state of financial ignorance or denial, according to the Bankrate Financial Literacy Survey. In fact, they say that some 75 percent of respondents claim they don't make any major purchases on credit cards unless they can pay them off immediately while 74 percent say they are concerned about being able to pay their credit card bills every month. Huh?

If people's claims about themselves are deceptive, then their outlook on their fellow consumers is beyond cynical. Moreover, 58 percent of respondents maintain that they pay off their credit cards in full every month--a marked contrast to studies that show the number at 40 percent. But remarkably, only 3 percent of respondents believe that people pay off their cards in full.

So, what does this survey show? Could it be we are braggarts who view our fellow citizens in the harshest possible light? Not exactly, because what the survey illustrates is a bizarre and conflicted attitude that we have toward money. In fact, it is even a touchier subject than sex.

I'm no psychiatrist but it would seem to me that these survey responses indicate a very deep connection between our actual financial lives and how we see ourselves. I read somewhere that money is valued not only for helping us live a more satisfying life, but also it's measured for its intrinsic value to us as people.
Usually, say the shrinks (and my brother is one of them), money problems aren't about money, but cover a multitude of life issues, so that when people have debt problems, it's not solely a matter of credit cards or a mortgage. They are using money to escape from problems.

"It's all about stuff," emphasizes comedian George Carlin. "Whoever dies with the most toys wins."

One thing, maintain the psychiatrists, is quite clear: the average person's relationship to money is usually based on a want, not a need. Actually, a number of studies have already confirmed that our tie to money is purely emotional and less practical.
With money being put on a pedestal, it's not surprising that people who experience problems in that area may not be honest about it. People try to hide the fact they are having problems, notes InCharge Institute, a nonprofit organization specializing in personal finance education and credit counseling. They say there's still a stigma attached to not paying bills or to owing creditors. People won't discuss it with even their closest friends or relatives. They don't feel comfortable saying, 'I have this problem.'
Of course, the reasons for side-stepping the truth about our own financial situation demonstrate why people perceive the financial health of others to be critical. This negative perception is also more complex than just wanting to keep up with--or surpassing--Mr. & Mrs. Jones. The survey respondents' views of eclipsing their neighbors match other studies claiming that people are likely to perceive themselves as smarter and more in control of their lives, no matter what the topic.

While some may chalk this up to a simple denial, it's really more than that. Keep in mind that our own behavior is generally quite complex. Just consider when we bought something major and either did or didn't pay it off. It's easy to compare our behavior to the occasional actions of others and feel superior.

This leads to another factor in people's perception of their fellow beings. Coverage of the economy in the media can influence how people perceive the financial health of others. For example, if you're a big television watcher, you tend to believe that there's more crime around than there really is. It's called 'cultivation hypothesis,' which shows that people who watch television a lot have more of a distortion of the truth. That's why so many new immigrants think everyone in America has a swimming pool.

But putting psychological theories aside, many people are simply lousy at managing their finances; one study shows that 25 percent of Americans don't even review their credit card statements each month.

So, what does this all come down to? We are multifaceted when it comes to money and we oft-times have an almost delusional view of our own finances. However, there is one area we can do something about and that is financial education. Simply put, the more we teach people about finance at an earlier age, the more likely they are to have a realistic and intelligent view of it as they grow older.

Register or login for access to this item and much more

All Accounting Today content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access