In short: The psychology of money studies how feelings, habits and surroundings shape our money decisions — why we spend, save and invest differently from what a calculator would work out.
Simply put: Classical economics assumed people decide like calculators. Behavioural economics shows that we decide quickly, out of habit and with feelings; Richard Thaler received the Nobel Prize (2017) for exactly this research. That is why knowledge alone is not enough: financial education raises knowledge far more than it changes behaviour. What works is arranging your surroundings so that the good decision is the easy one.
Example: Elena knows she should save, but month after month "nothing is left". She sets up an automatic transfer of €100 on payday. After a year she has €1,200 without having to decide anything each month.
Watch out: the psychology of money is full of famous findings that later turned out weaker. In this glossary we say what is solid and what is disputed (⚠).
Source: EU/OECD-INFE financial competence framework for adults (2022) — https://finance.ec.europa.eu/publications/commission-and-oecd-infe-publish-joint-framework-adults-improve-individuals-financial-skills_en · Kaiser & Menkhoff, Economics of Education Review 78, 2020, DOI 10.1016/j.econedurev.2019.101930