Loneliness is a risky business

"Money," said Benjamin Franklin, "has never made man happy, nor will it; there is nothing in its nature to produce happiness." Yet while money certainly doesn't buy happiness, new research suggests that lonely people, perhaps unconsciously, regard it as a substitute for friends.

By looking at how people behave in the laboratory and in the real world, a series of studies has found that people who feel socially excluded tend to make riskier financial decisions than their popular peers. The effects are so marked, says the scientist who led these studies, that major financial decisions such as choosing a mortgage or pension should never be made in the wake of a major social upset, such as a relationship break-up or even a serious argument with friends.

Rod Duclos, assistant professor of marketing at Hong Kong University of Science and Technology, said the findings, which he presented at the annual meeting of the American Psychological Association in Hawaii, "should come as a word of caution to consumers" and singled out older people as being particularly vulnerable. He added that, just as patients often find it reassuring to be accompanied during medical appointments, it would be a "good idea" for consumers to take a friend along to meetings with financial advisers, in order to counter the feelings of isolation that could prompt unwise decisions.

Professor Duclos and Professor Echo Wen Wan, from the neighbouring University of Hong Kong, conducted a series of studies with unsuspecting university students to find out whether feeling forlorn triggered a lapse in financial acumen. The first was Cyberball, an online ball-tossing game, which the students believed was a measure of their ability to mentally visualise their online partners. In reality, it was a way for the researchers to induce feelings of rejection.

This was done by rigging the game so that two players in the three-person game exchanged the ball lots of times, with the third player hardly getting a look-in. Afterwards, the players were asked, among other things, to rate how included or rejected they felt while playing the game. They were then asked to choose between two lotteries: one that offered an 80 per cent chance of winning $200, and a riskier one that offered a 20 per cent chance of winning $800.

The players who felt left out showed a greater preference for the riskier lottery than their ball-hogging peers. In the second study, 168 students were recruited under the guise of a memory experiment and variously asked to write about feeling socially included; about feeling left out; about a physically painful experience; or about what they had eaten and drunk recently.

When given the choice of a high-stakes gamble or a definite cash pay-out, those in the "excluded" group were more likely to go for the risky option. By comparing all four groups, the researchers concluded that it was exclusion, not sadness, that drives risk-taking: the "pain" group, though more miserable, were not as reckless. A third study again asked students to recall an instance of being either socially included or left out, and followed up, again, with a choice between two lotteries. But Prof Duclos made several critical changes.

First, one lottery involved the prospect of actually losing cash (Lottery A offered an 80 per cent chance of winning $500 and a 20 per cent chance of winning nothing, while Lottery B offered a 20 per cent chance of winning $2,400 and a 20 per cent chance of losing $100). Second, students were asked to say how risky they regarded those lotteries as. Third, they were asked how strongly they agreed or disagreed with various statements about money, for example, "money allows me to determine my own life course".

Even though all students knew Lottery B to be more of a gamble, the "excluded" group still showed a greater preference for it. They also claimed to believe more strongly in the power of money to shape their lives. Finally, researchers visited shopping malls, subways and parks in Hong Kong to quiz the public on their social lives and spending habits. Those with vibrant social connections were more likely to be in low-risk saving schemes, while self?described loners were more likely to bet on the horses, gamble in casinos and place their disposable income in high-risk schemes.

Prof Duclos explains that in a world where there are two basic means to get what we want, popularity and money, the unpopular place a stronger emphasis on cash to smooth their path through life, and are thus more willing to take big risks that carry bigger potential rewards. His findings add to a series of studies from all over the world, showing that our love affair with money varies according to how socially connected we feel. Compared with the "in-crowd", those who feel socially adrift are less inclined to donate to needy orphans, show a stronger desire for money, and feel more anxious when thinking about their last spending spree.

The lonelier you are, the more likely you are to splash out on accessories signifying group membership, such as branded clothing or leisurewear with sport logos, to boost a sense of belonging. Fascinatingly, that anxiety and stress can be partly relieved by allowing people to touch real money.

This is not just of academic interest. Policy-makers, claims Prof Duclos, should be taking this kind of research seriously. "In view of our findings, vulnerable older people, whose families have moved out, might constitute particularly good targets for unscrupulous marketers that profit from financial risk-taking, such as banks, brokers and insurers." The charity Age UK estimates that half of all people aged 75 and over live alone; and one in 10 Britons aged over 65 describes themselves as always or often lonely.

Prof Duclos suggests that policy-makers and consumer advocates might need to regulate certain sales practices in the financial services industry, such as strategically targeting the lonely elderly - or at the very least to persuade the potentially vulnerable to take a friend along to meetings about major financial or purchasing decisions.