personal finance

The Wealth of Wellbeing: A Behavioural Science Perspective

When we think about wellbeing, we often think about our health, including our mental state. Research has found that good financial health has a huge influence on improving overall wellbeing, while poor financial health is linked to stress, depression and lack of productivity. People in receipt of financial education often report feeling more confident, more in control of personal finances and exhibit better financial behaviours. Good finances have an added positive impact on the wider community and generations to come.

How Well Do Nudges Work?

The research literature on nudge effectiveness is growing. 2022 started with a new PNAS article reporting a meta analysis of 455 effect sizes from 214 publications. Here's a short summary.   

A Safe Space: Privacy Concerns and Financial Support Tools

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.

The Budgeting App Trap: When Spending Information Backfires

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.

Budget Depreciation: When Budgeting Early Increases Spending

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.

Stop Chasing the Past: Improving Investment Decisions with Social Disclaimers

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.

No Data, No Drama: How Behavioral Science Can Help the Banking Industry

With most of its attention captured by the global fervor around 'big data', the banking industry has failed to give behavioral science the attention it deserves. I argue that, considering today’s challenges to fully take advantage of big data, implementing insights from behavioral science is a more cost-effective approach to improve customer experience in banking.

My Savings Buffer Is More Than Yours

It is no secret that too few households save for a rainy day and this financial planning problem is a difficult habit to break. Would knowing your neighbours’ savings balance encourage you to save more?

Nudges in Personal Finance: The Case of Overdrafts

Unarranged overdrafts are financial products which help personal current account holders deal with outstanding balances or declined payments. However, consumers have the tendency to use these products too often, underestimating their negative financial consequences. Concerned by their financial well-being, the Financial Conduct Authority in the United Kingdom has begun to address the issue through the application of nudges.

Financial Decision-Making in Action

People's failure to act is an important problem discussed in behavioral economics and finance. But inappropriate action can also be detrimental. Find out more about the action bias in this post.

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