If it was possible to visually get a show of hands in answer to the question how many of you out there would like to be better with your money, we're going to guess we'd see a heck of a lot of palms in the air. Finances are one of those things in life that just seem hard. Some people are great with budgets and numbers, but for the rest of us it feels like a puzzle we'll never finish.
As it turns out, being good with money may all be in your head. Literally. A recently published study spanning 10 years looked at 2,000 University of Arizona students and their financial habits. The team took gender, race, and socioeconomic background into consideration, but found that, in the end, financial success has most to do with self-efficacy.
What the heck is self-efficacy? A psychologist Albert Bandura defined it as as a person's belief in their own ability to succeed in specific situations or accomplish a task. Basically, if you think you're good at something, you're going to be good at it.
That's all well and good, but it's not so easy to simply tell yourself, "I'm great at handling finances," and have it all fall into place.
The research team involved in the study first thought that family ties were most integral to student participants' success with money. If they were raised to be responsible in that department, they would be better at handling money. But study authors found that after these young people graduated from college, it was less about what mom and dad had taught them and more about what was going on inside their own minds.
They rated participants on a five-point scale that focused on financial literacy, curiosity, anxiety, and outlook. In the end, the results proved that those who believed they could manage money were better set up for financial well-being and stood a better chance of earning higher salaries. Those who were nervous about finances were more likely to seal their own fate with financial difficulties.
With all of that being said, maybe it's time to encourage our children in ways that make them really believe they've got what it takes to succeed in matters of banking and budgeting, rather than shaking our heads and yelling, "Ugh -- money!" when it comes to our own finances. That sense of self-efficacy may be all theirs, but it can't hurt to plant the seed at an early age.