Hope is a positive emotion. It helps people to get through hard times. But hope can have a flip side: it keeps people from walking away from bad situations when they should. When it's time to sell losing stocks, as explained in this article, the hope to break even might make investors end up in a worse financial situation.
More and more people struggle with debt, and while people differ in their motivations, preferences, and their reasons not to pay, debt collection practices rarely take these factors into account. Using psychological insights, debt collection can be made more debtor-friendly and effective. The results: increased repayments for companies and a lower financial burden for consumers.
There have never been more options to choose from when paying. Under conventional Economics assumptions, this should not make a difference in either decision-making or outcomes. According to behavioral economics, however, the payment method chosen does impact (financial) decision-making and its possible outcomes. In this article we dive into the impact a payment method can have on financial decision-making.
A typical behavioral pattern of investors is to reduce stock market exposure after a crash. We suggest a simple nudge based on the IKEA effect and the endowment effect that reduces this problem substantially: In case of a market crash, stockholders who have chosen their own portfolios are more likely to stick with their investment choices.
Consumers are becoming increasingly concerned about data privacy in their interactions with tools that support financial decision-making. The authors of this TFI research project investigate the impact of privacy concerns on consumers’ use of financial support tools by conducting four experiments using a savings calculator tool, a mortgage calculator tool and an investment advice tool.
Do budgeting apps always improve consumers' financial decisions? Contrary to common beliefs, the use of budget apps can increase spending, especially at the end of the budget period. The authors of this article propose five interventions to mitigate the acceleration of spending and help FinTech apps better serve consumers' financial needs.
Budgeting in advance is a good practice to control spending. Research reported in this article, however, shows that budgeting too early for a specific purchase may increase spending. This is due to what the authors term 'budget depreciation', a process in which consumers adapt to the reference point set by the budget, lower their pain-of-payment from the budgeted amount, and increase their willingness-to-spend.
In many countries, most transactions are still made in cash. Yet, keeping cash in your wallet can be quite cumbersome. Notes are light and easy to carry, whereas coins are heavy and bulky. Does the inconvenience of carrying coins have an effect on how easily we spend them?
Mutual funds cannot consistently return better-than-average performance. Yet investors often pick their mutual funds based on past performance. Researchers Leonardo Weiss-Cohen, Philip Newall and Peter Ayton conducted a long-term Think Forward Initiative research project that sought to answer how their investment decisions could be improved.
Consumers regularly track their expenses and assign them to categories like food, entertainment, and clothing, which is popularly known as mental accounting. Our research shows that consumption biases that result from mental accounting are not prevalent in Easterners due to their holistic thinking style, whereas Westerners exhibit such biases due to their analytic thinking style.
