It is no secret that the way we speak to others has a strong impact on how we are perceived, and how successful our interactions will be. The lesson from cognitive science is this: When it comes to money, the way we speak to ourselves is equally important.
A common interpretation in behavioural finance is that rationality is the result of a pure cognitive process which can be behaviourally biased. While cognitive biases are influences that affect rationality from within the cognitive system, affective biases refer to those influences that affect the cognitive system from outside. Unfortunately, the assumption that rationality is a pure cognitive process is not well motivated. Rationality results from the intrinsic interaction between cognition and emotions.
Many people are struggling financially. Figures from the Money Advice Service and DWP show that half of people say that they are worried about their finances, four in 10 people say that they could not easily cover an unexpected bill of £300, and 40% working age people in the UK face inadequate incomes in retirement. [...]
