Overview
Behavioral insights in consumer finance provide a framework for understanding how psychological factors influence financial decisions. By recognizing cognitive biases, emotions, and decision-making processes, financial institutions can design products that better meet consumer needs. This approach n...
Key Terms
Example: Loss aversion is a cognitive bias where people prefer to avoid losses rather than acquiring equivalent gains.
Example: Automatically enrolling employees in retirement savings plans is a nudge.
Example: People are more upset about losing $100 than they are happy about gaining $100.
Example: Investors often overestimate their ability to predict stock market movements.
Example: Knowing how to budget, save, and invest is part of financial literacy.
Example: Behavioral economics explains why people might spend more when using credit cards.