Cognitive drivers of suboptimal financial decisions: Implications for financial literacy campaigns

Abstract

In the past decade, there has been notable accumulation of evidence suggesting that many households have considerable difficulty navigating their financial path. For example, the national savings rate in the United States has become negative, resulting in growing consumer debt and challenging the financial well-being of the population. Furthermore, since the mid-1990s the bankruptcy rates have nearly doubled in the United States, and account delinquencies for credit cards and home mortgages have systematically grown. Interestingly, these trends have been witnessed at a time when new marketing regulations have been proactively introduced to the financial services sector, with the objective of better protecting the consumer from deceptive marketing practices and reducing households’ financial hardships.1-4 During the same time period, an increased focus on the development and assessment of financial literacy programmes has also been witnessed5,6.