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Commentary: Save for retirement? But we hate making financial decisions

8 0 390
11.06.2018

FLORIDA: The advice to use your head, not your heart, might not be helpful after all.

We all make tough decisions, but choices relating to money send many of us running in the other direction.

Unfortunately, ample evidence indicates that aversion toward financial decisions leads many of us to put off things like funding a retirement plan, saving at a sufficient rate, or just doing a better job managing our credit card debt. All of these things can hurt our long-term financial health.

Economists and behavioural scientists have proposed several explanations for this phenomenon.

For example, financial products are often quite complicated, and we may feel we lack the necessary expertise. We may be overwhelmed by too many choices, such as when picking mutual funds to put in our retirement plan portfolio.

But as valid as these reasons may be, there is more to the story.

MONEY MATTERS

Take me, for example: I have an MBA with a concentration in finance and a PhD in business, yet I still hate dealing with financial decisions. Whenever I get a statement from my bank, my instinct is to shove it in my desk drawer.

File picture of Singapore currency. (Photo: AFP/Roslan Rahman)


Clearly, knowledge regarding financial products or subjective perceptions of competence do not explain this type of behaviour very well. What is going on here?

Our research suggests that the culprit might be our stereotypes about money matters. People perceive financial decisions – more so than decisions in many other equally complex and important domains – as cold, unemotional and extremely analytical. In other words, as highly incompatible........

© Channel NewsAsia