How understanding empathy can lead to better financial decisions

Have you ever found yourself in a disagreement with your partner, wondering: “How could they possibly think that way?” Or perhaps your child reacts in a way that baffles you, leaving you frustrated and confused. It’s a familiar scenario – one that plays out in relationships of all kinds. And at the heart of it is a crucial skill: empathy . In these moments, it’s easy to believe that if we haven’t been through what someone else has experienced, we can’t fully understand where they’re coming from. But empathy isn’t about having had the same experiences – it’s about being able to see the world through their eyes. It’s a skill that, when honed, can deepen relationships, ease conflicts, and even make us better decision-makers in all aspects of life, including with our money . Many people mistake empathy for sympathy, assuming that to be empathetic we have to feel sorry for someone. But empathy isn’t about pity – it’s about understanding. And understanding doesn’t require us to have had the exact same life experiences as the people we care about. Imagine a financial life manager who only worked with clients whose exact background and wealth level matched their own. Good advisers understand their clients’ concerns, fears and aspirations even if they haven’t followed the same journey. Similarly, good friends, partners and parents strive to understand the motivations and emotions of those around them, even if their paths have been different. To truly understand someone, it helps to ask: “Why do they do what they do?” Every action has a reason behind it – even if it doesn’t make sense to us at first. Motivation is the “why” behind behaviour. Just like adults, children, partners and friends are always motivated by something – even if they’re not consciously aware of it. When someone seems “unmotivated,” it’s usually because they’re more strongly motivated by something else. Psychologists have long said that every behaviour makes sense when you understand the underlying reason for it. Consider these examples: Much like investing, where short-term decisions are often driven by emotional triggers – fear, greed or past experiences – personal interactions are shaped by underlying motivations we may not immediately see. Understanding this concept makes it easier to empathise with others when we’ve had similar experiences. If you’ve also been scared of the dark, stressed about money, or cautious with spending, you can relate on a personal level. However, there are two common mistakes people make when trying to be empathetic: A financial analogy works well here. A seasoned investor doesn’t need to have personally experienced a stock market crash to understand the impact it can have on others. Similarly, a therapist doesn’t need to have experienced grief to help someone through loss. A doctor doesn’t need to have had cancer to treat it. And you don’t need to have lived the same struggles as your partner or child to show them empathy. Empathy is about understanding someone’s frame of reference. It means recognising that if you had lived through their experiences, you might see the world the way they do. When a good financial life manager meets a client, they don’t immediately start listing solutions. First, they listen. They ask questions. They try to understand the client’s goals, fears and past experiences with money. This can lead to an understanding of their “money scripts”, or money personality. Only after gaining that understanding do they offer guidance. The same principle applies to personal relationships. Before offering advice, solutions or judgments, the first step is to listen and understand. When it comes to wealth, it’s the difference between a quick transaction and a long-term partnership. When people feel their concerns are heard and valued, they are more likely to trust the process – whether that’s a financial strategy, a business decision or a personal conversation. So, the next time you find yourself wondering: “How could they possibly think that way?” – pause for a moment. Step into their shoes. Consider their experiences. You might not agree, but you just might understand. And that can make all the difference.