Stories | June 14, 2017

Smarter money choices, and how your bank might help

How can financial institutions help you make the most of your money? Perhaps surprisingly, science shows the way.

How hard do you find it to change the way you save? It’s so easy to be tripped up by natural biases and habits of thought – as the ING International Survey confirms.

The survey series has been digging into people’s views and feelings about money, including how they save, since 2012. Year after year, the research shows that money decisions go beyond financial literacy. Financial choices are strongly influenced by family and peer effects as well as the macroeconomic landscape and a host of psychological factors.

Lessons for banking
ING behavioural scientist Nathalie Spencer and senior economist Ian Bright have written a paper outlining their findings for the Behavioural Economics Guide 2017. It suggests how financial institutions can help customers make the right money choices for them.

“Self-directed behaviour change is hard. Anyone who has let a diet slip or a new year’s resolution slide will not need convincing of that,” explains Spencer. “Myriad decisions made throughout a year, day or minute all add up, with consequences that can last a lifetime.”

“Self-directed change is hard. Anyone who has let a diet slip will not need convincing"

Battling misconceptions
Natural habits of thought tend to encourage misconceptions which can negatively affect people’s finances, Bright points out. For example, peer pressure may tempt people to buy a more expensive house with a larger mortgage – based partly on a commonly-held belief that house prices never fall.

“And a lack of attention paid to spending and earning patterns can result in a person falling into overdraft and incurring unnecessary fees,” he says. “Meanwhile, inertia encourages people to stay with accounts that pay below-average interest rates or investments with repeatedly poor returns.”

Many people may need help to make smarter financial decisions, the paper notes. “Arguably, institutions did not always until recently feel a need to change,” says Bright. “Banks and other groups have at times made good money from people’s financial mistakes.”

Behavioural Economics Guide 2017 is downloadable from

eZonomics team
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