The bigger the love of money, the bigger the losses. More than half of retail investors surveyed who scored high on the State Street Center for Applied Research's "love of money" scale actually have worse financial outcomes. The inverse is also true with investors that have a low love of money score making better investment decisions resulting in better financial outcomes.
The State Street Center for Applied Research surveyed 3,600 consumers across 20 countries and found that money lovers' emotional attachment to money exacerbates their behavioral biases leading to worse financial decisions and likely worse financial outcomes.
According to the survey, so-called money-lovers are less likely to contribute 6% or more to a defined contribution retirement plan and more likely to agree that saving is "something they can do later in life." They also tend to suffer from greater levels of "short-termism." For example, they would rather take the $1000 now versus wait five years for $1,900, which would equate to more money in their pocket.
Money-lovers are more prone to fear-based motives and greed-based motives for buying and selling. They are also more prone to hyperactive behavior, for instance they their check mobile device approximately twice as many times as those further down on the money-loving scale.
That said, the love of money decreases significantly with age with Gen Y scoring 67%, Gen X scoring 62%, Baby Boomers scoring 48% and Traditionalists scoring 35% on the scale.
"It's not because they have more money, it's because as individuals age they become much more aware that there are more important things in life than money," said Suzanne Duncan, global head of research of research at the State Street Center for Applied Research.
Interestingly, wealth level doesn't highly affect love of money scores. This is because it's not about how much money you have -- it's about your emotional connection to money itself.
In order to make better financial decisions, people need to focus on a goal such as college or retirement, as opposed to the money itself, according to Duncan.
"By focusing on a future goal it enables people to overcome their behavioral biases like greed and short-termism in order to make better financial decisions," said Duncan.