The behavioral science of personal finances: Correlation practice and online discussion prompt

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Last month (August 2023) I wrote a blog post with suggestions on how we can embed financial literacy education into the Intro Psych course (Frantz, 2023). If I had not been behind on my science periodicals reading, I would have seen the excellent interview piece with financial psychologist Wendy De La Rosa in the Monitor on Psychology (Fairbank, 2023).

De La Rosa and her colleague Stephanie Tully have been researching subjective wealth perceptions. “A person’s perception of their financial situation is often more important than their objective financial status” (p.33) (Fairbank, 2023). If you believe that you’re in dire financial straits—whether you actually are or not—the stress of that belief will interfere with your sleep, your concentration, and your health.

One study found a statistically significant .32 correlation between household income and subjective financial situation (Gasiorowska, 2014). In other words, yes, the higher one’s household income, the higher one tends to rate their subjective financial situation—defined as “perceived financial situation, ability to make ends meet and adequacy of income to fulfill needs and wants” (Gasiorowska, 2014, p. 72). But a correlation of .32 is well below a perfect 1.0 correlation.

After covering correlations, ask students what other variables they think may affect how one evaluates their own financial situation such that there would be a mismatch between how much money one actually has and their perception of how much money they have.

The biggest mediator the researchers found was financial control (Gasiorowska, 2014). The more control a person has over their finances, the better able they are to align their actual income with their perceptions of that income. This reminds me of a couple I knew. He handled all of the finances, because she didn’t want to. However, she had high anxiety around how much money they had. She was certain they were going to be destitute any minute. He would assure her that they had plenty of money to make ends meet and then some. He would show her the bank statements and the bills. It would allay her fears for a bit, and then the anxiety would come roaring right back.

While this study was not done with children or adolescents, I have to wonder how much of a disconnect there might be between their family’s actual household income and their subjective wealth perception. I wonder how many caregivers bring their children and adolescents into financial discussions. For example, “This is how much money we have coming in every month. Here is how much everything costs: utilities, cell phones, Internet, groceries, entertainment. This is how much we’re able to save.”

In the Monitor article, we learn that Wendy De La Rosa’s mother did not speak English, so as a child De La Rosa translated financial documents for her mother, such as bank notices and credit card statements. De La Rosa had a front row seat to her family’s financial situation. With such early training on the inner workings of household finances, I imagine De La Rosa entered adolescence with an understanding of household money-management that many children don’t have.

De La Rosa and Tully appear to have found another variable that helps create a mismatch between actual income and subjective wealth perceptions: pay frequency. “[G]etting paid more frequently increases subjective wealth perceptions and as a result, we tend to spend more than if we got paid less frequently” (Fairbank, 2023, p. 34). This really underlines the importance of creating a household budget and sticking to it. It will be hard to pay rent if the money is going out as fast as it’s coming in.  

De La Rosa has a TED series called “Your Money and Your Mind.” There are eight videos, all less than five minutes long. This could make for an interesting online discussion prompt: Watch the eight videos created by financial psychologist Wendy De La Rosa. Which video is the most important one for your friends to watch? Why? Lastly, what was the most interesting thing you learned from that video? Explain.

Lastly, I wonder how many students would enroll in a Financial Psychology course. It would be a fun one to teach!



Fairbank, R. (2023, June). 5 questions for Wendy De La Rosa. Monitor on Psychology, 54(4), 33–34.

Frantz, S. (2023, August 10). Increasing financial literacy through Intro Psych: Anchoring & operant conditioning. Macmillan and BFW Teaching Community.

Gasiorowska, A. (2014). The relationship between objective and subjective wealth is moderated by financial control and mediated by money anxiety. Journal of Economic Psychology, 43, 64–74.



About the Author
Sue Frantz has taught psychology since 1992. She has served on several APA boards and committees, and was proud to serve the members of the Society for the Teaching of Psychology as their 2018 president. In 2013, she was the inaugural recipient of the APA award for Excellence in the Scholarship of Teaching and Learning at a Two-Year College or Campus. She received in 2016 the highest award for the teaching of psychology--the Charles L. Brewer Distinguished Teaching of Psychology Award. She presents nationally and internationally on the topics of educational technology and the pedagogy of psychology. She is co-author with Doug Bernstein and Steve Chew of Teaching Psychology: A Step-by-Step Guide, 3rd ed. and is co-author with Charles Stangor on Introduction to Psychology, 4.0.