In families we trust
These results are similar to the findings of the 2011 ING International Survey on attitudes to savings. Asking family was by far the most popular source of financial advice for all 19 countries surveyed. No doubt, when it comes to sensitive and serious topics, who you trust plays a big role in the advice you follow.
The limits of trust
Although turning to others can be a good idea to get a sense of the broader picture it’s important to bear in mind that each individual is exactly that – an individual. We each have different financial situations, feel comfortable taking different amounts of risk and have varying ideas of what we want our future to hold. Consequently, what one family member suggests may not be the best thing for you.
When I was young
While family memebrs are likely to give advice with your best interests at heart, they will also be jaded by past experience. Hindsight bias may make them view the world as more predictable than it actually is. Relatives who prospered may look back and unwittingly believe their current wealth was made by a series of deliberate choices on their part whereas, in truth, luck and general economic conditions favoured them. Another problem with advice based on experience is people’s ability to block out poor financial decisions. Without knowing, any wise words become biased and a reduced version of the broader picture you were looking for.
Follow the leader
When making financial decisions it’s surprising how many people follow the herd. Many take shortcuts by looking at what people are doing around them as shown by a previous eZonomics poll; 37% of respondents said that if their friends increased the amount they saved, they would too.
To overcome these potential dangers searching the net can be a useful way to wise up on financial decisions. For important decisions, it may be useful to back up discussions with family with more formal advice, perhaps from your bank, a financial adviser or an appropriate charity.