Protecting Your Loved Ones: Why does one become a victim of Financial Frauds?

As I reflect on my life journey and as a life and financial coach and mentor, I am reminded of the numerous heart-wrenching stories I have encountered. Stories of??youngsters, parents, elderly individuals, and those who have spent a lifetime building their nest eggs, only to see their hard-earned savings vanish in the blink of an eye.

Understanding the reasons and emotional triggers that lead to these unfortunate events is crucial in safeguarding our loved ones from financial fraud and scams.

Ignorance and Lack of Knowledge

Let's start with ignorance.

Many victims, even our elderly parents, lack the basic financial literacy needed to navigate today's complex financial landscape. According to a survey by the National Centre for Financial Education, India only consists of 27% of the population that falls into the category of “financially literate”, indicating widespread lack of knowledge .

This gap in understanding leaves them vulnerable to scammers who exploit their naivety. Our parents, who taught us so much, are often unaware of the red flags associated with these fraudulent schemes.

Greed and Fear of Missing Out (FOMO)

Greed and FOMO are potent motivators that often drive individuals to make irrational decisions.

Imagine a retiree being promised returns that are too good to be true. The allure of quick and substantial returns can be blinding, making it difficult to see the risks involved. Scammers are adept at playing on this desire and turning it into a trap that ensnares even the wisest among us.

Fear and Threats

Fear is a powerful tool used by scammers. They exploit our vulnerabilities using threats to succumb. Whether it’s the fear they induce, of losing their life savings or threats of physical harm or emotional blackmails, the anxiety induced can cloud judgment and force us into hasty decisions. For instance, in the first four months of 2024 alone, Bengalureans lost a whopping Rs 197 crore to fraudulent investment schemes.

Momentary Weakness and Negative Mindset

We all have moments of weakness, but for some, these moments coincide with life-altering scams. A negative mindset, influenced by past bad experiences, can make individuals more susceptible. Scammers strike during these periods of emotional fragility, capitalizing on the victim's weakened state.

Lack of Self-Confidence

Many victims lack self-confidence and lack trust in their own decision-making capabilities. This is especially true for our parents and elderly relatives, who might feel overwhelmed by the fast-paced changes in financial markets and technologies. Doubting their own abilities, they may defer to the seemingly knowledgeable scammer.

Overthinking and Anxiety

Overthinking and anxiety can create a vicious cycle of fear and ignorance. Victims often imagine worst-case scenarios, which perpetuates a loop of fear and irrational decision-making. This emotional turmoil can prevent them from seeing the reality of the situation, leaving them vulnerable to scams.

Lack of Technical Knowledge

In today's digital age, a lack of technical knowledge is a significant disadvantage. Many scams are perpetuated online or via mobile phones, and individuals who are not tech-savvy are easy targets. For example, phishing emails, fake websites, and fraudulent calls can deceive those unfamiliar with these tactics. According to the US Federal Trade Commission, consumers lost $1.9 billion to fraud via phone calls alone in 2020 .

Projection of Past Mistakes

Victims often project past mistakes onto their current decisions, creating blind spots that scammers exploit. Previous financial missteps can haunt individuals, causing them to second-guess their actions and rely on the seemingly trustworthy scammer.

Fear of Societal Judgment

The fear of societal judgment and the involvement of authorities like the police can influence victims. The stigma associated with falling for a scam can prevent individuals from seeking help or admitting their mistake, further entangling them in the scammer's web.

Lack of Holistic Health

Holistic health, encompassing physical, mental, and emotional well-being, plays a crucial role in decision-making. A lack of holistic health can impair judgment and make individuals more susceptible to scams. Stress, fatigue, and emotional distress can cloud rational thinking.

Lack of Big Picture Perspective

Victims often lack the ability to see the big picture and context of their financial decisions. This narrow focus prevents them from understanding the long-term implications and risks involved. Emotional immaturity and a lack of emotional intelligence further exacerbate this issue.

Judgment and Conclusions

Snap judgments and hasty conclusions can lead to poor financial decisions. In moments of panic and loneliness, victims may make decisions based on incomplete information or misguided beliefs, unable to consider other viewpoints due to ego or fear.

Cultural Background and Social Dynamics

Cultural background and social dynamics also play a role in susceptibility to scams. The pressure to conform, the fear of judgment, and the inability to treat others as equals can influence financial decisions. The lack of collaboration and mutual respect can further isolate individuals, making them easy targets.

As we navigate the complex financial landscape, it is essential to address these psychological and emotional factors that make individuals vulnerable to scams. By fostering awareness, building self-confidence, and promoting holistic health, we can equip ourselves to recognize and resist fraudulent schemes.

If you have anything to add or comment on, you are welcome to join the discussion.

Or if you want to take this further, feel free to connect with me.

---------------------------------------------------------------------------------------------------------- Ramamurthy is a life and finance coach who focuses on achieving wholistic (physical, emotional, mental, spiritual, social and energetic) wellbeing. On his quest to find alternative ways of education, he has explored various modalities and life skills to enrich his life.

As a life and finance coach, Rama helps people to live a better life and face the challenges and fears in their life and career with simple tools and techniques.

You can read more about him at Ramazen.com