Choose the life that is most useful, and habit will make it the most agreeable. Sir Francis Bacon
Financial distress has long been known to be a risk factor in the development of health problems— including postpartum depression. Besides changing everything, having children changes a couple’s finances. So, it seems fitting to include a chapter on finances to help new parents get a handle on money illusions. This chapter also provides strategies for avoiding the common pitfalls that can cause money induced stress, relationship conflict, and depression.
Economists have long known that people are not logical or rational when it comes to money. John Maynard Keynes first coined the term “money illusion." It was later made famous (at least among economists) by Irvin Fisher who wrote a book by this title in 1928. Money illusion refers to people’s tendency to think about money in terms of its face value instead of purchasing power. This illusion leads people to spend more when they are using credit cards than when they are using cash, and to have inaccurate mental categories about how much money they have or owe. Neuroscientists have even identified the area of the brain—the medial prefrontal cortex—that is involved in money illusion.
Marketing tactics exploit money illusion when they charge the same for something but make that something smaller, or when they devise “pennies a day” schemes, or when they urge you to think about purchases as “investments. People who are unaware of the ways money illusion influences their choices, often end up making poor financial decisions and wind up with low self confidence, an external locus of control, and pessimistic expectations about life. Money illusion and depression are thus intimately interconnected.