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Financial Freedom - Take control of your happiness

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The well-known proverb ‘money can’t buy you happiness’ may be true – but research has revealed that having control of your finances can in fact make us feel significantly happier. A report named ‘The Pursuit of Happiness’ (PoH)1 has exposed that when it comes to financial stability, Gen O “don’t need to be rich, but they want to secure their financial futures while doing what they love.”

So, we got in touch with Professor Darren Duxbury from the Newcastle University Business School, and the Behavioural Research in Finance (BRiF) group. We wanted to understand more about the correlation between the levels of control Gen O have over their money and how happy they feel, and investigate the significance of being financially in control.

The importance of being in control

The PoH Report highlights that for Gen O, “happiness comes from freedom and control.” The study, which looked at the relationship between financial control and happiness, uncovered that those who have higher control over their finances were 43% happier than those who don’t. This confirms that for many, being in control can indeed increase happiness.

A reason for this may be that “stable finances and control help get them the freedom they want.” This generation live in a world where there’s more exposure to new experiences and choice than ever before, so having control of their finances will help give them the opportunity to enjoy these.

Gen O don’t feel in control

Despite the clear importance of Gen O being in control, the report also explains that “finances are the most difficult part of their lives to control.” Duxbury explains that “we know from past survey evidence that a substantial proportion of society struggle from time to time with their finances.”2

Our recent survey supports this by revealing and that nearly half (49%) of Gen O feel they need more control over their future – with 39% feeling they need more control over their personal finances. This lack of control is impacting their ability to save, with many even getting into debt problems.

do not save as much money as they'd like to

worry about how much debt they have

often use their overdraft

don't pay their credit card debt each month

As a result, this is having a direct impact on how Gen O feel when thinking about their finances. Many report feeling stressed, nervous and even overwhelmed – significantly more so than older generations – indicating that they’re far from feeling in control and happy. This is because “for some, debt carries a psychological or emotional burden, reducing wellbeing.” Consequently, “a lack of financial control increases the likelihood of, and therefore stress associated with, problem debt,” explains Duxbury.

How do your finances make you feel?

Gen O v 55+




Why is this happening?

Head in the sand attitude: Because of the negative feelings associated with their finances, Gen O avoid thinking about their spending or savings behaviour. This head in the sand attitude directly influences the amount of control that this generation have on their finances…they need to begin thinking about money before they can put measures in place to control them.

Social pressures: As a result of a number of social and cultural pressures, such as Fear of Missing out (FOMO), it’s easy for Gen O to lose control of their spending habits. For those who do start with good intentions, such as a planned budget or a plan to save for the future, influences from friends and increased temptation to spend money mean that it’s easy to quickly lose control over what they’re buying.

Financial apathy: Our survey revealed that a quarter (25%) of Gen O say they don’t know much about financial matters. Without an understanding or interest about the importance of budgeting, or saving to secure their financial futures – there is less motivation to gain control over their finances.

Lack of education and knowledge: 25% of Gen O also say they don’t know how to budget well. Therefore, of those who are keen to start gaining control of their finances, without the proper guidance to teach them about the best ways to manage their money they may still struggle to know where to start.

How to regain control

Duxbury tells us that “regaining financial control helps alleviate the psychological or emotional burden associated with problem debt, releasing Gen O to devote time and emotional energy to other matters.” According to the PoH Report, one of the top milestones Gen O associate with adulthood is financial independence. So it’s important for this younger generation to “to acquire the right skills and mind-set to succeed in this fast-changing world.”

Our survey revealed some of the current methods which Gen O are using in an attempt to gain control over their finances. However, with only a third using mobile banking apps, and less than one in 10 using a budgeting app on their phone, it’s clear that Gen O can reap the benefits of technology even more, to help them regain control over their personal finances, and ultimately save for the future.

Budgeting apps

Online budgeting/calculationtools

Excel spreadsheets

Pen and paper/back of envelope

Mobile banking apps

Online banking

Source: Aviva research run in consultation with Future Foundation and ICM (2016)

From online banking, through to the latest budgeting apps, gadgets can significantly help Gen O keep their personal finances under control by monitoring spending, aiding budgeting, and helping achieve their savings goals. “Making the change today, helps regain financial control and restore financial wellbeing,” says Duxbury. So, we’ve researched some of the handiest apps now available to download onto their phone, to help Gen O regularly keep an eye on their finances on the move.

Top apps for personal finance

Money Dashboard: Allows you to view all your different bank accounts on one platform. It categorises your spending so you can view where your money has gone, however you can’t make any payments or transfers. Download Money Dashboard for free.

You Need a Budget (YNAB): By syncing your bank accounts and tracking your spending habits, you’ll be able to account for every penny spent. Setting budgets and financial goals will help you save money each month. You will need to download the desktop version to get the app. YNAB costs around £3.50 a month.

Wally: This app allows you to see what money is going in and what’s going out – helping you understand your spending habits and achieve your goals. You’re also able to take photos of all of your receipts so you can keep them for your records. Wally is available to download for free.

Goodbudget: This app allows you to divide your money up into different pots or for different areas of spending each month. You’re also able to sync and share your budgets with other family members or friends. There’s a free version of Good Budget available as well as a ‘plus’ version with additional features for around £3.50 a month.

Monzo: Download the Monzo app to apply for a card. You can transfer money onto your card at the click of a button, which is synced up to your phone. All your ingoings and outgoings will be tracked, and you’ll also be sent smart notifications to help you keep an eye out on your finances. You can get Monzo on your phone at no cost.

There are many techniques you can take to help control their finances – however by taking advantage of the most forward-thinking technology, and using one of these apps can be a great starting point to help Gen O get their money management on track.

Additional sources

[1] 6,000 Millennials (aged 18-34) across all continents (Aviva has referred to Millennials as Gen O throughout this article)
[2] Ironfield-Smith, C., Keasey, K., Summers, B., Duxbury, D., & Hudson, R. (2005). Consumer debt in the UK: Attitudes and implications. Journal of Financial Regulation and Compliance, 13(2), 132-141.

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