Behavioural Science

One key concept in behavioural science is hyperbolic discounting , a topic I've written about in the past and on which I focused my Ph.D. Hyperbolic discounting is our tendency to focus more on immediate rewards, than on those in the distant future. This bias helps explain why people spend money on an expensive holiday rather than saving money for future needs. Here are three examples of how hyperbolic discounting affects our financial well-being: 1. Impulsive buying: We might display a pattern of overspending on things we don't need because the immediate joy feels more rewarding than the abstract idea of saving for the future. This impulsive behaviour can lead to unnecessary expenditures and debts. 2. Difficulty maintaining long-term financial goals: Hyperbolic discounting often causes us to prioritize immediate gratification over long-term financial goals. For instance, we may choose to go on a fancy vacation instead of investing that money in our pension. This makes it cha...

When I was a child in Mexico, Sundays were special not just because of family gatherings but because my grandfather would give us a small amount of money, a practice known as 'Domingo.' Although this was intended to teach us the value of money, it never explained the concepts of saving or effective financial management. Fast forward to my teenage years: I landed my first job and, soon after, got my first credit card. Within six months, I was buried in debt, a situation so dire that my father had to intervene, regretting that he hadn't taught me proper financial habits. Today, as an adult who only started saving and investing a few years ago, I've realized that my story isn’t unique. In the UK, three quarters (73%) of the population fall below the financial literacy benchmark. In Mexico, the scenario is even grimmer, with 65% of the population spending more than they earn, a direct result of inadequate financial literacy. This gap in financial literacy is not only detrim...

Opening my banking app to see personalised budget tips or having my fitness app adjust to my progress shows just how great and useful personalisation can be. However, getting Taylor Swift recommended every day because I listened to ONE song isn't ideal -nothing against Taylor, but this kind of repetitive suggestion can lead to information fatigue, especially when it feels like she's everywhere! When applied correctly, personalisation can be incredibly effective. We, behavioural scientists, have long claimed that people are more likely to respond positively when they feel they are being addressed as individuals and when their needs are empathized with. For instance, in a previous discussion on my blog, I explored how personalisation could better engage users in financial services.  Personalisation uses historical data to tailor services to individual needs, making each interaction more relevant and engaging. However, as we increasingly rely on this technology, it's crucial ...