Level 2 of 5—Social
This is part 2 of a 5 part series—The Social-Ecological Model, applied to Money. We’re exploring how this idea in psychology applies to how we think about money—and what that means for finance brands.
In the second layer of the ‘onion’—we have the Social Level. In this layer, we identify specific factors that influence our behavior from the people spend time with, work with, and live with. These types of interactions affect the way we see the world, and as a result, how we interact and behave with it.
Unlike the first “individual” layer of the social-ecological model, the social layer factors that influence behavior often change based on the people you interact with regularly.
Think these people——
Your family.
Your friends.
Your coworkers.
Your neighbors.
And, with the growing number of communities and social networks online (e.g., Discord, TikTok, Reddit, and even Xbox/Playstation), now—there are more ways and opportunities to extend one’s network and connect with more people.
These social interactions rub off on you in a way that influences your behavior, even money behavior.
The science—behavior is modeled
Since the initial Bobo Doll experiment was conducted in the early 60s, we know children model adult behavior that they see. In the Bobo Doll study, adults hit and yelled at a blow-up punching doll in front of a child. The children were then left all alone with the Bobo Doll—and results became super clear. The children did the same. They beat and yelled at the doll, signaling that they had learned, or “modeled”, the behavior after the adult. This is not only seen with a Bobo Doll—but with money as well.
Studies conducted to understand financial literacy, financial outcomes, and parental behavior showed just this—Money behavior from parents is modeled in their children. In short—if your parents were likely to spend money on unnecessary things, you’re more likely to do the same. In contrast, if your parents typically invest their money into real estate or stocks, you’re more likely to do the same.
Financial education—from piggy bank to financially literate
Family life researchers suggest that just the act of talking about money breaks the “taboo stigma” of money. Which, increases positive outcomes of financial literacy in the future. But this simple act of talking about money can have effects decades later. It’s shown to have positive influences on future relationships and marriages—which proves importance because finances are one of the most common reasons couples fight.
It could even start with a Piggy Bank that signals the importance of saving. When I got cash as a gift when I was a kid, I remember my parents telling me that half of it needed to go into savings, and the other half I could do whatever I wanted with. So when I was 8 years old, half went into savings and the other half went into my mortgage (my Lego house mortgage that is).
Money influences go beyond your standard demographics—age, gender, race/ethnicity. This social level (Level 2) of the model suggests that your behavior is influenced by those in “your circle of influence”. When parents are talking about money —children are listening and taking it in. And—the family that you grow up with, significantly affects the behaviors you pick up as you’re older. This goes beyond family, into friendships and other social relationships.
Impact of behavior by friends—spending behavior
Happy hour on Tuesday. Dinner with friends on Thursday. Coffee with an old college roommate Friday morning. Concert with a group of friends on Friday night. Bottomless mimosas on Saturday. Dinner date with girlfriend on Saturday night. NFL game on Sunday. And buying that new $80 trendy cup that you saw all over your friends' Instagram stories.
We’re not saying these behaviors are bad, but your friends and family's influence can directly influence your spending habits. If your friends are all about experiencing expensive things every weekend, you’re likely to follow suit. FOMO right?
What does this mean for finance brands?
Younger segments of consumers are being taught how to money manage as a child. Delivering resources and educational tools to parents, to assist in teaching their children, brings up a unique value to begin building trust with the entire family.
Consumer perception and behavior within the industry is diverse. And—has become more diverse since you started reading this… Personalized solutions, product offerings, feature sets, content, messaging, and relatableness (not a real word but you know what I mean) are key to becoming saturated within the future markets.
Segmenting by behavior becomes super important. With the diversity of today’s consumers, demographic segmentation has become stagnant. The social level of this model helps show the importance of behavioral segmentation. Perceptions, emotions, behaviors, and purchase decisions are influenced by more than just age and gender—diving deeper delivers critical insights into the customer journey and pain points.
