Thursday, March 27, 2025

 

The Psychology of Money in Everyday Life

Money isn’t just numbers in a bank account – it’s woven into our habits, emotions, memories, and even our cultural identity. How we earn, spend, and save money often reflects deeper psychological patterns. In this post, we’ll take a conversational journey through the psychology of money in everyday life, looking at four key areas: our daily money habits, emotional spending, financial trauma, and cultural influences on money. Along the way, we’ll touch on insights from psychology (like behavioral economics and cognitive biases) and highlight ideas from experts such as Morgan Housel, author of The Psychology of Money. By understanding why we relate to money the way we do, we can make more sense of our financial decisions – and maybe even make better ones. Let’s dive in!

Everyday Money Habits and How They Form

Everyone has daily money habits. You might grab a coffee on the way to work every morning or automatically transfer a chunk of your paycheck to a savings account. These routines feel almost automatic – and that’s exactly what a habit is. Habits form when we repeat a behavior in a consistent context and our brains start to go on “auto-pilot.” Research shows that with each repetition of a behavior, small changes accumulate in our brain, gradually forging an association between the situation (say, walking past your favorite café) and the action (buying a latte)​

. Over time, the cue and routine become so linked that we do it without much thought. In other words, we train ourselves to expect that latte every morning – it becomes comforting and routine.

But where do our money habits and attitudes start? Interestingly, some patterns emerge very early in life. A University of Michigan study found that children as young as five already show distinct emotional reactions to spending or saving money, and these feelings predict their actual behavior​

. In that study, some kids were little “spendthrifts” (they felt no pain in handing over money for a toy) while others were “tightwads” (they felt bad about spending and wanted to save)​. These tendencies weren’t simply copied from parents – they seemed to arise naturally. This suggests our early temperament and experiences play a big role in shaping how we approach money. A child who gets a thrill from buying candy may grow up into an adult who loves shopping sprees, whereas a kid who hates parting with their piggy bank coins might become a super-saver.

Family environment does leave a mark too. Psychologists talk about “money scripts” – beliefs about money we absorb in childhood that unconsciously drive our adult financial behavior​

. For example, if you grew up hearing “we can’t afford that” all the time, you might develop a script of scarcity (always feeling like money is about to run out). Those scripts can turn into ingrained habits: maybe you always hunt for bargains or, conversely, splurge whenever you have cash because you never learned to save. Morgan Housel points out that our personal experiences with money might make up only a tiny fraction of what’s happened in the world economy, but they shape 80% of how we believe the world works. In other words, if you lived through tough times, you might carry very cautious money habits forward – even if the world around you has changed for the better.

Our brains also have some funny quirks (cognitive biases) that influence everyday money habits. Consider mental accounting – the tendency to treat money differently depending on where it comes from or what we plan to use it for. Rationally, a dollar is a dollar, but humans aren’t always rational. We often put money into “buckets” in our mind. For instance, you might happily spend a $500 tax refund on a new gadget, even while carrying credit card debt, because that refund feels like extra bonus money​

. Or someone might keep a separate “vacation fund” jar at home and contribute to it, yet still swipe their credit card for everyday expenses (paying high interest) – effectively ignoring that all money is interchangeable. This mental accounting habit can lead to quirky decisions, like splurging found money but pinching pennies from your paycheck.

Another common bias is loss aversion – the idea that losing money hurts about twice as much as gaining the same amount feels good​

. This can make us habitually risk-averse: for example, an investor might stick to ultra-safe choices not because it’s objectively the best strategy, but because the fear of a loss looms larger than the potential reward. Or you might cling to an unused subscription just because “I already paid for it” (a sunk cost fallacy, related to loss aversion), even though canceling would save money now.

Everyday money habits are also influenced by how gratifying they are. Generally, spending is fun (it gives an immediate reward) whereas saving is abstract and future-oriented. It’s no wonder many people struggle to save consistently. In the U.S., for example, a survey found nearly 40% of Americans save 5% or less of their income (and 19% save nothing at all)​

. One reason is that swiping your card for a new purchase gives you a quick dopamine rush – a feeling of reward – whereas putting that same money into savings doesn’t provide an instant thrill. Psychologically, it’s difficult to sacrifice now for a benefit you’ll enjoy much later. Setting up good habits often means finding ways to make the responsible choice easier or more automatic. For instance, automating a transfer to a savings account each payday can bypass the temptation to spend – you don’t “feel” that money as available, so you’re not deciding anew each time. Behavioral scientists Wendy Wood and Dennis Rünger note that habits grow strongest when a behavior is repeated frequently and consistently​. So even saving a small amount every day (or each week) can, over time, turn into a solid habit that feels as natural as your morning coffee.

Before we move on, it’s worth remembering that our habits, however ingrained, are ultimately driven by what’s going on inside us – our needs and emotions. As we’ll see next, money is deeply emotional. Those daily spending patterns or penny-pinching routines often have an emotional logic behind them. So, let’s explore how our feelings play into financial decisions.

Emotional Spending: The Link Between Emotions and Financial Decisions

Have you ever bought yourself a treat after a rough day to lift your spirits? If so, you’ve experienced retail therapy – using shopping or spending as a way to cope with emotions. Don’t worry, you’re in good company. One global survey covering 23 countries found that nearly 80% of people said they had made a purchase to cheer themselves up in the past month

. What’s more, this urge to splurge isn’t just for the wealthy or big spenders – it was universal. In that survey, even among people with lower incomes, a large majority indulged in an occasional “mood boost” purchase​. It might be a pint of ice cream, a new pair of shoes, or some gadget you’ve been eyeing – the size doesn’t matter as much as the intent. The act of buying something just for joy or comfort is often enough to give us a little emotional lift.

https://www.pexels.com/photo/excited-young-female-leaning-on-shopping-bags-and-smiling-happily-7319127/

A little “retail therapy” – treating ourselves to something we want – can indeed brighten our mood. Nearly 80% of people worldwide admit to splurging on purchases to lift their spirits​

. But why does spending money sometimes make us feel better?

Psychologically, shopping can tap into our brain’s reward system. When you shop (especially for things you want, not need), your brain can release “happy hormones” like dopamine and endorphins, the same chemicals associated with other pleasurable activities​

. In fact, simply browsing and anticipating a purchase can trigger a dopamine rush – it’s the thrill of the hunt. This is why adding items to your online cart or walking through your favorite store can feel exciting even if you don’t end up buying everything. Dr. Susan Albers, a psychologist, explains that the whole process of shopping – from window-shopping to imagining using the product – can give us a surge of those feel-good brain chemicals​. Our brain essentially rewards us because, on some primitive level, it sees acquiring things as beneficial (in evolutionary terms, gathering resources could mean improved survival)​.

Beyond the chemical buzz, spending can also satisfy emotional needs in the moment. One big factor is the sense of control it provides. When life feels gloomy or when we’re feeling down, it often comes with a sense of powerlessness. A fascinating study in the Journal of Consumer Psychology found that sadness is linked to feeling a lack of control – but making shopping choices can restore a feeling of autonomy and control, which in turn reduces sadness​

. Think about it: maybe you can’t control a frustrating work situation or a breakup that has you blue, but you can decide to buy that cool new jacket or pick out a fancy cupcake. That little act of decision-making (“I want this, I choose this for myself”) gives a momentary boost in personal agency. As Dr. Albers puts it, when things aren’t going your way, getting exactly what you want (even if it’s a small purchase) can feel like an achievement and brighten your mood​.

Emotional spending isn’t always about negative emotions, either. We spend to celebrate and reward ourselves, too. Got a promotion? Let’s splurge on a nice dinner. Feeling proud of finishing a tough project? You might feel you “deserve” that new gadget. Our emotions – positive or negative – often nudge us to spend. In fact, consumer psychologists say that spending patterns can be like a Rorschach test for our inner feelings; they reveal emotional needs we might not even be aware of​

. For instance, someone consistently buying luxury brands might deep down be seeking status or validation (a boost to self-esteem), whereas someone who frequently treats friends to nights out might be fulfilling a need for social connection and belonging.

While emotional spending can provide a genuine mood boost or stress relief, it’s a double-edged sword. The danger is when shopping becomes a primary coping mechanism for emotions. The relief is usually temporary – the bill will come due later, and it might bring new stress. Many of us know the cycle: you feel low, you splurge on something, you get a brief high, but later you might also feel guilt or anxiety about spending too much. If the pattern repeats often, it can lead to financial problems (debt, clutter, or buying things you don’t truly need). Behavioral economics tells us we have a present bias – a tendency to prioritize immediate gratification over long-term consequences. Emotional spending is a classic case: present-you wants to feel better now, while future-you may have to deal with the credit card statement.

That said, occasional retail therapy in moderation can be relatively harmless and even beneficial for your mood​

. The key is self-awareness – knowing when you’re buying something because of how you feel, and checking in with yourself: “Am I going to regret this later? Is there another way I could cope right now?” Some people set a rule like waiting 24 hours before making non-essential purchases, which allows the intense emotion to pass and lets you reassess with a cooler head. This can prevent impulse buys driven purely by a fleeting feeling.

Emotions are at the heart of many money decisions, big and small. In fact, even people who consider themselves very rational with money are not immune – worry, excitement, fear, pride, envy, and joy all play roles in financial choices (from buying a house to picking stocks). And sometimes, our emotional relationship with money can be traced back to much deeper experiences, even traumas. In the next section, we’ll explore financial trauma – how extreme money experiences can leave lasting emotional scars that shape our behavior for years to come.

Financial Trauma – What It Is, How It Develops, and Its Long-Term Impact

Not all our money feelings come from everyday ups and downs. Some are rooted in trauma – distressing or life-altering experiences involving money that leave a deep imprint. We often think of trauma in terms of events like accidents or abuse, but trauma can be financial too. Imagine growing up in extreme poverty, or your family going bankrupt and losing your home, or being swindled out of your life savings. These events can be psychologically devastating. In fact, going through a major financial crisis can produce symptoms much like other forms of trauma: anxiety, fear, shame, and a skewed sense of safety or trust when it comes to money.

Financial trauma can start in childhood. Many of our parents tried to shield us from money problems, but kids are perceptive – they notice the stress. Growing up in a financially volatile household, especially one where the family is barely scraping by, can leave a deep mark on a child’s psyche​

. One person described the experience of childhood poverty vividly: “Every day is an emergency when you’re poor. You’re always like one bad bill away from losing everything.”. That ever-present fear becomes a part of you. Even if that child grows up to earn a good salary, a part of their brain is still bracing for disaster, stuck in that scarcity mindset. As Mars Nevada (who grew up with financial insecurity) reflected, being aware of that kind of existential threat as a kid “messes you up in a way that I don’t know if I’m quite past yet as an adult.”​. Children absorb the emotions around money. If they see parents constantly anxious or arguing about bills, they may internalize those fears. Ed Coambs, a therapist and financial advisor, notes that a person’s way of handling money in adulthood can indeed be an emotional response to earlier stressors​. For example, someone who watched their parents lose everything might grow up to be extremely conservative with money – never taking even reasonable risks, hoarding every penny. Another person might have seen their family pin their hopes on a big windfall or risky moves, and as an adult they either repeat that pattern or swing to the opposite extreme.

https://www.pexels.com/search/financial%20problems/

Financial trauma can lead to intense stress and anxiety around money. Someone who has experienced a severe financial crisis may feel overwhelmed by bills or even avoid dealing with finances due to fear. Early experiences of poverty or financial chaos often leave lasting scars that influence how we handle money as adults​

.

Trauma around money isn’t only from childhood. Adults can be hit with financially traumatic events too, and these can have a “long tail” – long-lasting effects that change one’s behavior and mindset​

. Losing a long-held job, going through a costly divorce, being drowned by medical debt, or being the victim of fraud can all trigger financial trauma. One especially painful scenario is financial infidelity or betrayal – for instance, discovering your spouse secretly ran up huge debts or spent your savings on an addiction or an affair. In such cases, there’s a double trauma: the emotional betrayal and the financial hit. Therapist Debra Kaplan explains that this kind of shock can be a one-two punch that shatters your ability to trust​. After being blindsided like that, people may become extremely risk-averse and mistrustful with money – essentially traumatized not just by the loss of funds, but by the loss of security in the relationship. Kaplan describes clients who, after such an event, feel like “I can’t trust myself because I believed this person… So they end up not spending because they don’t trust” anyone​. It’s as if touching money or making financial decisions reminds them of that betrayal, so they emotionally shut down in that area.

Financial trauma can manifest in various behaviors:

  • Hyper-vigilance or anxiety: Constantly checking accounts, obsessively worrying about prices, feeling panic at spending even on necessities. Money is viewed through a lens of fear.

  • Avoidance: On the flip side, some traumatized people avoid dealing with money at all because it’s too painful. They might not open bills or will “tune out” finances, which of course can lead to more problems.

  • Oversaving or hoarding: An extreme saver might emerge from trauma, where the person finds safety only in accumulating money or possessions and can’t enjoy any of it for fear of losing it. (Think of those who lived through the Great Depression and then refused to spend a dime unnecessarily for the rest of their lives.)

  • Risk-taking or impulsive spending: It may sound counterintuitive, but some respond to trauma with a “you only live once” attitude – if everything can be lost, might as well enjoy it now. This could lead to rash investments or splurges as a form of denial or coping.

Psychologists and financial planners have started to recognize “financial PTSD” as a real issue. It’s part of why the field of financial therapy has been growing, which blends emotional counseling with financial coaching​

. The idea is to help people unpack their “money story” – the experiences and beliefs behind their financial behaviors – and heal those wounds so they can manage money in a healthier way​. For someone suspecting they have financial trauma, working with a professional (therapist or financial counselor) can help reframe those deep-seated beliefs. As one expert, Alex Melkumian, advises: sometimes you need to “delve into your money story and figure out why you behave the way you do” before you can really make practical changes​.

It’s important to show oneself compassion here. If you have intense reactions around money (whether it’s dread at spending or panic when thinking about the future), it might not just be that you’re “bad with money” – it could be that you have unprocessed trauma or ingrained beliefs at play. The good news is, like other forms of trauma, this can be worked through over time. By slowly building positive experiences (small financial wins, regained trust, safety nets) and perhaps getting support, people can rewire some of those knee-jerk reactions.

We’ve talked about how personal experiences – especially tough ones – shape our money psyche. But we’re also influenced by the broader context we live in. Next, let’s zoom out and see how culture – the society and family we grew up in – affects the way we view and use money.

Cultural Influences on How People Perceive and Use Money

Money may be a universal tool, but our attitudes toward it are anything but universal. Culture plays a huge role in how we think about money. The norms, values, and even historical events of the society we grow up in can subtly (or not so subtly) shape our financial behaviors. Consider this: why do people in some countries save far more of their income than others? Why is talking about salary perfectly normal in one culture but taboo in another? These differences often boil down to cultural influences.

A clear example is the contrast between cultures that prioritize frugality versus those that encourage spending. In many East Asian cultures influenced by Confucian values, there is a strong emphasis on saving and avoiding waste. China, for instance, has traditionally had very high household savings rates​

. One reason, beyond economics, is cultural: virtues like thrift and prudence have been prized for generations. Singapore and South Korea similarly have high savings, and scholars like Heng-fu Zou suggest that Confucian or Taoist influence (which extol frugality and caution) makes people culturally more disposed to save. In these cultures, there may also be informal expectations – for example, adult children might feel responsible to support aging parents (hence they save more), or conspicuous consumption might be seen as irresponsible.

Contrast that with, say, the United States, where the cultural ethos has often celebrated consumerism and the “American dream” of bigger and better. Spending and showing success through material goods can be more socially accepted in some Western cultures, whereas in a country like Japan, ostentatious displays of wealth might be frowned upon. It’s not that Americans are doomed to spend more by genetics – it’s the cultural narrative that differs. Advertising and social norms in the U.S. have long promoted buying and consuming (especially with easy credit), whereas a culture like Germany historically has been more tight-fisted and debt-averse.

Speaking of Germany, here’s a fascinating cultural tidbit: Germans traditionally love using cash and are wary of debt. Before the pandemic, cash was used in Germany for transactions more than twice as often as the European average​

. Credit cards and personal debt are viewed with a skeptical eye. Why? One big reason is historical memory. Germany went through infamous bouts of hyperinflation in the 1920s (where paper money became worthless) and that trauma lingered in the cultural psyche​. “Cash doesn’t stink,” a German saying goes – meaning cash is trusted. There’s a collective memory that too much reliance on banks or inflationary money can wipe you out, so people stick to tangible cash and are cautious about borrowing. Similarly, many who lived through the Great Depression in the U.S. raised their kids with frugal habits and a distrust of banks or stock markets. In these cases, a cultural experience (economic collapse) influenced entire generations’ money behavior.

https://www.pexels.com/photo/various-currencies-from-several-different-countries-4695995/

Different cultures, different money habits. Around the world, attitudes toward saving, spending, and debt vary widely. For example, in Confucian-influenced cultures, frugality and saving are strongly emphasized​

, while other societies may encourage consumer spending. Even within one country, cultural subgroups can have distinct money attitudes that impact financial behavior​. Understanding these influences can shed light on why our personal approach to money might differ from someone in another part of the world.

Cultural norms also dictate what we use money for. In more collectivist cultures (which emphasize family and community), it’s common for money to be pooled or to circulate among extended family. For instance, in many South Asian, African, or Latin American families, supporting relatives (paying for a sibling’s education, helping parents, sponsoring family events) is expected when you have means. Money is seen as a tool for the group’s well-being, not just individual enjoyment. In individualistic cultures, the prevailing idea is that money earned is yours to do with as you personally see fit – people might still help family, but it’s more discretionary. These attitudes shape behavior: someone from a collectivist background might prioritize sending remittances home over personal luxury spending, whereas someone from a more individualistic background might prioritize their own financial independence above all.

Another fascinating influence is how culture affects financial risk-taking and planning. Studies have found that national culture can influence things like willingness to invest in stocks, use of credit, or preference for secure jobs. One study examining 76 countries found that cultural differences in attitudes towards risk and time can lead to different savings and investment behaviors​

. For example, some cultures foster long-term orientation (thinking in decades) while others focus on the present. If you grow up in a long-term-oriented culture (like many in East Asia), saving for the future or for the next generation might feel very natural. In a more present-focused culture, there might be more of a live-in-the-moment spending mentality.

Even within the same country, subcultures have their own money styles. In Switzerland, for instance, researchers identified three main money attitudes – seeing money as status/prestige, seeing it as something to manage carefully, or seeing it as a means to achieve goals – and found that these attitudes differed between the French-speaking and German-speaking regions of Switzerland​

. The cultural environment (even language and local traditions) led to variations in how people viewed debt and savings. Culturally shaped attitudes were strongly linked with whether people tended to incur debts or not​.

Immigration provides a great natural experiment for cultural influence. When people move to a new country, do they adopt the local financial habits, or keep those from their culture of origin? Research by economists Costa-Font, Giuliano, and Ozcan looked at immigrants in the UK and found that cultural beliefs about saving persisted strongly, even into the second and third generation. Migrants from high-saving cultures continued to save more than those from low-saving cultures, even though they were all living in the same country with the same economic conditions

. For example, a family from a culture where thrift is emphasized (say, China or India) might carry those habits with them, and their kids and grandkids may also exhibit higher saving rates compared to peers from cultures that encourage spending​. This shows how deep-rooted cultural norms around money can be – they can survive a change of scenery and last for generations.

Cultural attitudes can also influence what people consider the purpose of money. Is money for security, or enjoyment, or status? In Maslow’s hierarchy of needs (the famous pyramid from basic needs to self-actualization), money is closely tied to the lower levels – it helps provide food, shelter, safety. Once those basics are covered, culture might guide what’s next. In some places, having money might equate to gaining esteem (showing achievement), whereas in others, modesty is valued and flaunting wealth is frowned upon. Some cultures might encourage using excess wealth for philanthropic or religious purposes; others might emphasize leaving an inheritance to children. These values shape our financial goals: one person might think “I want enough money to retire comfortably and help my kids get started, that’s success,” while another thinks “I want to build a business empire” or “I want to experience the best things in life now.” Neither is right or wrong – they’re just different scripts handed to us by our environment.

It’s enlightening to recognize our own cultural money lens. You might realize that your attitude toward debt, for instance, isn’t just your quirk – it may have a lot to do with what you observed growing up or the prevailing attitudes in your community. The good part is, we can also learn from other cultures. For instance, Americans could perhaps benefit from adopting some of the saving ethos of other cultures, while some high-saving cultures might learn about enjoying the fruits of one’s labor from more spendy cultures. In an increasingly globalized world, we’re exposed to many different money mindsets, and that can help us choose the best aspects from each.

Conclusion

Money touches almost every aspect of our daily lives, and as we’ve seen, it’s never just about dollars and cents. It’s about our habits – those little routines and ingrained behaviors that we often do without thinking. It’s about our emotions – the bursts of joy, stress, or comfort that spending and saving can bring. It’s about our past experiences, which can empower us or haunt us in our financial present. And it’s about the cultural stories we’re part of, which quietly shape what we believe is normal or desirable to do with money.

The common thread through all of this is that behavior and mindset are central. Morgan Housel emphasizes that handling money well isn’t so much about how smart you are, but how you behave​

. Are you patient? Do you panic in a downturn? Can you resist temptation or get back on track after a mistake? These behavioral and psychological traits determine a lot about financial success. Housel also reminds us of the extreme subjectivity in how we view money – our personal history might be only a tiny slice of what’s happened in the world, but it shapes the bulk of our worldview​. Simply being aware of that bias – that “I see money through the lens of my own story” – can help us make more objective decisions​. In other words, understanding the psychology of money arms us with insight to question our impulses and beliefs.

The hope is that by exploring these facets – habits, emotions, trauma, and culture – you’ve gained a clearer picture of why you (and others) handle money the way you do. Perhaps you recognize a habit loop you want to change, or you realize an emotional trigger that leads you to overspend, or you have a newfound appreciation for how Grandma’s frugality was shaped by her times. Money is often painted as a dry, mathematical topic, but in reality it’s deeply human and often quite emotional.

The psychology of money is an ongoing lesson. As Housel’s book illustrates through countless anecdotes, people think about money in wonderfully weird ways, and there’s always more to learn​

. The more we learn, the better we can cultivate healthier money behaviors, make informed choices that align with our true values, and perhaps worry a little less along the way​. After all, the goal isn’t to obsess over money – it’s to reach a place where money is a positive tool in our lives, providing security, freedom, and even happiness where it can.

Ultimately, by understanding the psychological underpinnings of money in everyday life, we empower ourselves to handle our finances with more self-awareness and grace. Whether that means breaking a bad habit, practicing a bit of mindful spending, seeking help to heal from financial trauma, or simply respecting that our neighbor’s money choices might stem from a culture or experience different from our own – it all contributes to a healthier relationship with money. And a healthier relationship with money can lead to better financial well-being, less stress, and more freedom to focus on what truly matters to us in life.

Sources:

  • Housel, M. The Psychology of Money. (Insights on behavior over intelligence in finance​

    and the influence of personal experience on money worldview​).

  • Scott Rick et al. (2018). Study on children’s emotional reactions to money showing early formation of spendthrift/tightwad tendencies​

    .

  • Bankrate Survey (2018) via Psychology Today – Statistics on Americans’ saving habits​

    .

  • Wood, W., & Rünger, D. – Psychology of Habit (2016). Explanation of habit formation through context repetition​

    .

  • Deloitte “Urge to Splurge” Survey (2023) – 23-country survey on retail therapy (80% use mood-lifting purchases)​

    ; commentary by consumer psychologist on spending revealing emotional needs​.

  • Cleveland Clinic (Dr. Susan Albers, 2022) – Explanation of retail therapy benefits: dopamine “happy hormones” and restoring sense of control to ease sadness​

    .

  • Sahadi, J. (CNN, 2022) – “How early traumas can affect your relationship with money.” Descriptions of childhood poverty trauma and quotes on lasting impact​

    , and expert insights on adult financial trauma and behaviors (Kaplan and Coambs)​.

  • Financial Therapy Association – noted as a resource for addressing money-driven emotional issues (blending psychology and financial planning)​

    .

  • Henchoz et al. (2019) – Swiss Journal of Economics and Statistics: Study on cultural attitudes in Switzerland affecting money behavior (different linguistic regions show different money attitudes and links to indebtedness)​

    .

  • Costa-Font, Giuliano, & Ozcan (2018) – PLoS ONE: Study finding immigrants retain saving habits from culture of origin (high-saving cultures’ immigrants save more, even generations later)​

    .

  • Oban International (2021) – “How culture affects financial decision-making”: Examples of cultural differences (Confucian frugality in China/Singapore​

    ; German cash preference and debt aversion due to historical hyperinflation memory​).

  • Kahneman & Tversky – Behavioral economics concept of loss aversion (losses felt ~2x more strongly than gains)​

    .

  • Thaler, R. – Mental accounting concept (people treat windfalls differently than ordinary income)​

    .

  • Morgan Housel – Emphasizes importance of reasonable behavior over strict rationality in personal finance​

    , and the idea that understanding human nature and money can lead to better outcomes in life​.

Thursday, March 13, 2025

 Kopi luwak

Kopi luwak, also known as civet coffee, is a coffee

that consists of partially digested coffee cherries,

which have been eaten and defecated by the Asian

palm civet (Paradoxurus hermaphroditus). The

cherries are fermented as they pass through a civet's

intestines, and after being defecated with other fecal

matter, they are collected.[1] Asian palm civets are

increasingly caught in the wild and traded for this

purpose.[2]

Kopi luwak is produced mainly on the Indonesian

islands of Sumatra, Java, Bali, Sulawesi, and in East

Timor. It is also widely gathered in the forest or

produced in farms in the islands of the Philippines,

[3]

where the product is called kape motit in the Cordillera

region, kapé alamíd in Tagalog areas, kapé melô or

kapé musang in Mindanao, and kahawa kubing in the

Sulu Archipelago.

Kopi luwak is also produced in Palawan's Langogan

Valley. The beans from droppings of the Asian palm civet and

Palawan binturong (Arctictis binturong whitei) are collected from

the forest floor and cleaned.[4][5]

Producers of the coffee beans argue that the process may improve

coffee through two mechanisms: selection, where civets choose to

eat only certain cherries; and digestion, where biological or

chemical mechanisms in the animals' digestive tracts alter the

composition of the coffee cherries.

The traditional method of collecting feces from wild Asian palm

civets has given way to an intensive farming method, in which the

palm civets are kept in battery cages and are force-fed the cherries. This method of production has raised

ethical concerns about the treatment of civets and the conditions they are made to live in, which include

isolation, poor diet, small cages, and a high mortality rate.[6][7][8]

Although kopi luwak is a form of processing rather than a variety of coffee, it has been called one of the

most expensive coffees in the world, with retail prices reaching US$100 per kilogram for farmed beans

and US$1,300 per kilogram for wild-collected beans.[9] Another epithet given to it is that it is the "Holy

Grail of coffees."[10]

An Asian palm civet

Defecated luwak coffee

berries in East Java

The origin of kopi luwak is closely connected to the history of coffee production in Indonesia; Dutch

colonialists established coffee plantations in Indonesia and imported beans from Yemen. In the 19th

century, farmers in central Java started to brew and drink coffee from excreted beans collected at their

plantations.[11]

Kopi luwak is brewed from coffee beans that traversed the

gastrointestinal tract of an Asian palm civet, and were thus

subjected to a combination of acidic, enzymatic, and fermentation

treatment. During digestion, digestive enzymes and gastric juices

permeate through the endocarp of coffee cherries and break down

storage proteins, yielding shorter peptides. This alters the

composition of amino acids and impacts the aroma of the coffee.

In the roasting process, the proteins undergo a non-enzymatic

Maillard reaction.

[12] The palm civet is thought to select the most

ripe and flawless coffee cherries. This selection influences the

flavour of the coffee, as does the digestive process. The beans begin to

germinate by malting, which reduces their bitterness.[13] When performed

in nature, or in the wild, these two mechanisms achieve the same goal as

selective picking and the wet or washed process of coffee milling: 1)

harvesting optimally ripe cherries and 2) mechanically and chemically

removing the pulp and skin from the cherry, leaving mainly the seed.[14]

Traditionally, excreted coffee beans were collected directly in plantations

and forests. As the international demand for kopi luwak increased, some

producers turned to caged production methods to increase yields. In 2014,

the annual kopi luwak production was grossly estimated at less than

127 kg (280 lb). It is produced in Indonesia, East Timor, the Philippines,

Thailand, Vietnam and Ethiopia.

[15]

The taste of kopi luwak varies with the type and origin of excreted beans, processing, roasting, aging, and

brewing. The ability of the civet to select its berries, and other aspects of the civet's diet and health, like

stress levels, may also influence the processing and hence taste.[16]

Within the coffee industry, kopi luwak is widely regarded as a gimmick or novelty item. The Specialty

Coffee Association of America (SCAA) states that there is a "general consensus within the industry...it

just tastes bad". A coffee professional compared the same beans with and without the kopi luwak process

using a rigorous coffee cupping evaluation. He concluded: "it was apparent that luwak coffee sold for the

story, not superior quality...Using the SCAA cupping scale, the luwak scored two points below the lowest

History

Production

Taste

A cup of kopi luwak from Gayo,

Takengon, Aceh

Asian palm civet in a cage

of the other three coffees. It would appear that the luwak

processing diminishes good acidity and flavor and adds

smoothness to the body, which is what many people seem to note

as a positive to the coffee.”[17] Professional coffee tasters were

able to distinguish kopi luwak from other coffee samples, but

remarked that it tasted "thin".[18] Some critics claim more

generally that kopi luwak is simply bad coffee, purchased for

novelty rather than taste.[17][19][20] A food writer reviewed kopi

luwak available to American consumers and concluded "It tasted

just like...Folgers. Stale. Lifeless. Petrified dinosaur droppings

steeped in bathtub water. I couldn't finish it."[21]

Several commercial processes attempt to replicate the digestive process of the civets without animal

involvement. Researchers with the University of Florida have been issued with a patent for one such

process.[22][23] Brooklyn-based food startup Afineur has also developed a patented fermentation

technology that reproduces some of the taste aspects of Kopi Luwak while improving coffee bean taste

and nutritional profile.[24][25][26]

Vietnamese companies sell an imitation kopi luwak, made using an enzyme soak which they claim

replicates the civet's digestive process.[27]

Imitation has several motivations. The high price of kopi luwak drives the search for a way to produce

kopi luwak in large quantities. Kopi luwak production involves a great deal of labour, whether farmed or

wild-gathered. The small production quantity and the labor involved in production contribute to the

coffee's high cost.[28]

 Imitation may be a response to the decrease in the civet population.[29]

Growing numbers of intensive civet "farms" have been established

and are operated in Southeast Asia, confining tens of thousands of

animals to live in battery cages and be force-fed.[30][31][32] "The

conditions are awful, much like battery chickens", said Chris

Shepherd, deputy regional director of TRAFFIC in Southeast Asia.

"The civets are taken from the wild and have to endure horrific

conditions. They fight to stay together but they are separated and

have to bear a very poor diet in very small cages. There is a high

mortality rate and for some species of civet, there's a real

conservation risk. It is spiraling out of control".[6] The trade in

palm civets for the production of kopi luwak may constitute a

significant threat to wild populations.[2]

Imitation

Animal welfare

A window display in an

upscale coffee shop

showing kopi luwak in forms

of defecated clumps

(bottom), unroasted beans

(left) and roasted beans

(right)

In 2013, People for the Ethical Treatment of Animals (PETA) investigators found wild-caught civets on

farms in Indonesia and the Philippines. They were deprived of exercise, proper diet, and space. Video

footage from the investigation shows abnormal behaviours such as repeated pacing, circling, or biting the

bars of their cages. The animals often lose their fur.

[33] A BBC investigation revealed similar conditions.

Farmers using caged palm civets in north Sumatra confirmed that they supplied kopi luwak beans to

exporters whose produce ends up in Europe and Asia.[8] Tony Wild, the coffee executive responsible for

bringing kopi luwak to the Western world, has stated he no longer supports using kopi luwak due to

animal cruelty and launched a campaign called "Cut the Crap" to halt the use of kopi luwak.[34]

Kopi luwak is one of the most expensive coffees in the world, selling for

between $220 and $1,100 per kilogram ($100 and $500/lb) in 2010. The

price paid to collectors in the Philippines is closer to US$20 per

kilogram.[16] The specialty Vietnamese weasel coffee, which is made by

collecting coffee beans eaten by wild civets, is sold at US$500 per

kilogram.[35] Most customers are Asian, especially those originating from

Japan, China, and South Korea.[36]

Some specialty coffee shops sell cups of brewed kopi luwak for US$35–

80.[37][38][39]

Investigations by PETA and the BBC found fraud to be rife in the kopi

luwak industry, with producers willing to label coffee from caged civets

with a "wild sourced" or similar label.[33][8]

Genuine kopi luwak from wild civets is difficult to purchase in Indonesia

and proving it is not fake is very difficult – there is little enforcement

regarding use of the name "kopi luwak", and there's even a local cheap coffee brand named "Luwak",

which costs under US$3 per kilogram but is occasionally sold online under the guise of real kopi luwak.

Coffee beans can be "seeded" with the same microbes as in civet gut to produce the same coffee flavor

without having to deal with civet excrement.[10]

The binturong is also sometimes kept captive for production of kopi luwak.[40][41]

There are reports of a kopi luwak type process occurring naturally with muntjac and birds. Bat coffee is

another variation that is in demand. Bats feed on the ripest coffee and fruits and spit out the seeds. These

seeds are dried and processed to make coffee with a slight fruity flavor.

[42][43]

Price and availability

Authenticity and fraud

Variations

In the movie The Bucket List, billionaire health care magnate Edward Cole (played by Jack Nicholson)

brings kopi luwak with him on all of his travels, but is unaware of how the drink is produced.[44] Carter

Chambers (Morgan Freeman) explains how civets defecate kopi luwak coffee beans, and that the gastric

juices of the defecated beans give kopi luwak its unique aroma.

The Japanese manga series Beastars features an anthropomorphic civet character named Deshico that

produces kopi luwak