People are social creatures. So it makes sense that our social activities have at least some impact on the way we spend and save.
What is ‘social influence’?
Very simply, social influence is a psychological theory describing how our behaviour, choices and habits can be influenced by other people – whether that’s friends, family, partners, or society in general.
But how can it change my behaviour?
So, the theory says there are three ways social influence can sway the decisions you make.
Conformity: where you change your behaviour to be more like other people, or to fit in with a crowd.
Compliance: when you make decisions because you’re asked to by someone else and you feel compliance might strengthen the relationship.
Obedience: when you choose to do something because you’ve been told to by an authority figure.
Of course, all of these processes are happening internally. So you might not even realise how social influence is affecting you.
How does social influence affect my money?
When it comes to money, there are so many occasions when our decisions might be influenced by those around us. Can you spot the different types of social influence in these scenarios? We’ve put the answers below for you to check if you’re right.
• Scenario 1:
You’re eating out with friends. You weren’t planning on ordering a starter, but everyone else is. What’s an extra £7?
• Scenario 2:
It starts raining on the walk home. You have an umbrella but your friend says they’d rather get a cab than get wet. It won’t be too pricey if you split it
• Scenario 3:
You and your flatmates are trying to decide on a TV package. You don’t watch much TV but they all want a premium sports package. You can’t be the only one to say no…
• Scenario 4:
You’ve saved your deposit and think you’ve found the house you want. But when you show your parents they tell you to hold off. Your money might be worth more in a few months
(Eating out: Conformity, Taking a taxi: Compliance, TV packages: Conformity, First home: Obedience)