Scientists Figured Out How Money Affects Your Brain and It’s Fascinating

Psychology of money

Twice each year, I add up our bank accounts and other assets to see where we are financially.

Then, my wife and I look at the numbers. It makes us feel good (well, most of the time).

Money is a drug.

Many writers use this metaphor, but it’s more than just figurative. Research shows your brain reacts to cash in some of the same ways it reacts to drugs.

In fact, your brain’s response to various financial situations can cause you pleasure or pain, make you feel stronger, even make you refuse to take free money.

Here are some of the latest findings about your money and your brain, and a few suggestions as to what you can do to benefit from — or avoid — the effects of the drug called money.

Getting High on Money

Using functional magnetic resonance imaging (fMRI), scientists scan people’s brains while they think certain thoughts or engage in specific activities — and these studies help us learn more about money’s effects on the brain.

For example, in one experiment outlined by Harvard Business Review, participants played a game for money while hooked up to fMRI devices.

The brain scans of people about to make money were almost identical to those of drug addicts high on cocaine. Specifically, there was more neural activity in the nucleus accumbens.

Here’s what one of the researchers said:

“We very quickly found out that nothing had an effect on people like money — not naked bodies, nor corpses. It got people riled up. Like food provides motivation for dogs, money provides it for people…”

In another study, researchers predicted whether people would choose riskier investments based on activity in the nucleus accumbens.

We can see two takeaways here:

1. Instead of using other drugs, why not make some money for a safer high?

2. Be careful: The money “high” can lead to riskier choices. When you feel too excited about a financial decision, slow down and think about it.

Why You Might Refuse Free Money

The ultimatum game is an experiment involving two volunteers.

Researchers designate an amount of money, and a “proposer” offers a portion of the money to a “responder.”

If the responder accepts, he gets the money proposed and the proposer gets the rest. If he refuses, they both leave with nothing.

If you’re the responder, and the proposer offers you $15 of the $100 the two of you get to share, you can say yes or no. If you say yes, you get $15 and the proposer gets $85. If you say no, you both go home with nothing.

Game theory suggests as “self-interested income maximizers,” proposers will offer as little as possible to keep more and responders will accept any proposal, rather than getting nothing.

But in practice, proposers often offer close to 50% of the money, and responders often refuse low offers — especially offers of 20% of the money or less.

Researchers get the same results all over the world, even when participants play for the equivalent of three months’ salary.

Yes, people refuse free money, perhaps just to punish the proposer for making an “unfair” offer. With fMRI, we can see what’s going on in the decision-makers’ brains.

While making the decision, the proposer’s dorsolateral prefrontal cortex lights up, reports Harvard Business Review. This is the center of awareness and we use it when we solve problems.

When a responder gets a low offer, the anterior insula is activated. This part of the brain is involved when you feel anxiety, pain and hunger.

In fact, the anterior insula has “spindle cells,” commonly found in your digestive system — so you may have a very real “gut feeling” when you consider financial choices.

Watch for your own brain’s reaction when it might lead to irrational decisions.

For example, you might refuse an “unfair” offer for a table in the last hour of your rummage sale, even though you’ll end up just giving away the table away to be rid of it. It would be better to make at least some money, right?

As a real estate agent, I saw this phenomenon often. People felt the value others put on their home was unfair, so they refused to sell when market-price offers came in. Then, they were forced to sell for even less because they needed to move soon.

Try to mentally set aside the “fairness” of an offer. Instead, look at it in terms of how your finances will be affected if you accept it.

Money as a Pain Reliever

Money can relieve pain, according to a number of studies covered by

One experiment found people who counted money experienced less pain if they dipped their hands in hot water afterwards. Another found they felt more pain from the hot water if they first wrote about their recent expenses.

Physical pain isn’t the only kind affected by money. Researchers also found counting money diminished the pain of social distress. Writing about their bills caused participants an increase in psychological pain when they were put in a position to feel social distress.

You can use these findings at home.

Got a headache? Try counting money.

And if you’re a shy person, you might want to put an extra wad of cash in your pocket before going to a party.

Money, Love and Strength

Other reports on money’s effects on our brains suggest it can be a substitute for love and make us feel stronger.

Money can substitute for social acceptance and reduce the pain of social discomfort, found Xinyue Zhou, a scientist at Sun Yat-Sen University in China.

“We think money works as a substitute for another pain buffer — love,” he says.

In experiments where volunteers counted money and put their hands in hot water, they experienced another effect beyond pain relief: Participants reported feeling stronger.

So, maybe keep a little pile of money around for counting, to relieve pain as needed and fool your brain — you might feel loved and a little stronger.

The Money Illusion

Economists say the “money illusion” is when people get fixated on the nominal value of money, rather than on what it buys.

Thanks to fMRI machines, we can now see this tendency in action within the brain, The Independent reports.

In one experiment, volunteers were given a “salary” for doing computer tasks, and could then spend the money on items in a catalog. But some were given 50% more money and a catalog with 50% higher prices.

In other words, whether they had the higher or lower salary, they had the exact same spending power.

But try to tell that to your brain!

Researchers found the brain’s reward centers were much more active when participants earned the higher salary, even though they couldn’t buy more than on the lower salary. The bigger numbers alone were enough to trigger a bigger response.

That is your brain on money.

Your Turn: Do you feel better when you handle money, and do you believe you can overcome your brain’s irrational tendencies when it comes to financial decisions?

Steve Gillman is the author of “101 Weird Ways to Make Money” and creator of He’s been a repo-man, walking stick carver, search engine evaluator, house flipper, tram driver, process server, mock juror and roulette croupier, but of more than 100 ways he has made money, writing is his favorite (so far).