Using data drawn from the British Household Panel Survey, we analyse the relationship between personality traits and financial decision-making focusing on unsecured debt and financial assets. Personality traits are classified according to the ‘Big Five’ taxonomy: openness to experience, conscientiousness, extraversion, agreeableness and neuroticism. We explore personality traits at the individual level and also within couples, specifically the personality traits of the head of household and personality traits averaged across the couple. We find that certain personality traits such as extraversion are generally significantly associated with household finances in terms of the levels of debt and assets held and the correlation is often relatively large. The results also suggest that the magnitude and statistical significance of the association between personality traits and household finances differs across the various types of debt and assets held in the household portfolio.
We’ve made it to Christmas week, and it’s a magical time of year. But it’s weeks earlier — around the time the festive drinks arrive at my local Starbucks — that I start brimming with excitement and anticipation about spending time with family and friends. And then I find myself in line behind 25 people at the mall, when even streaming David Sedaris’s “Santaland Diaries” on my iPhone doesn’t make me smile.
There are many ways to compare finances, but perhaps a more holistic measure of financial health looks at household wealth, a comparison of what a family’s assets (home, cars, investments and bank accounts) are worth, versus what they owe. And when it comes to wealth, or net worth, the gap between the richest Americans and everyone else is at an historic high.
“Why Headlines Matter.” “Misleading Headlines Can Lead You Astray.” “How What You Read Affects What You See.” “How Bad Headlines Make Bad Memories.” “Eleven Reasons Headlines Are Important.” “You’ll Never Believe How Important an Accurate Headline Is.”
Those are all possible titles for this piece that I discussed with my editor. And, actually, the one that we picked may be the most important part of this article. By now, everyone knows that a headline determines how many people will read a piece, particularly in this era of social media. But, more interesting, a headline changes the way people read an article and the way they remember it. The headline frames the rest of the experience. A headline can tell you what kind of article you’re about to read—news, opinion, research, LOLcats—and it sets the tone for what follows.
Cash is the only retail payment system that requires no system of accounts for counter-parties to transact. The only record of its possession is its tangible presence. Any two parties that can meet face to face can exchange cash without worrying about payment clearing and settlement, default risk, payment fraud, identity theft or systemic risk. But cash has a number of hidden costs that fall disproportionately on the poor and disenfranchised. While the rich pay minimally for accessing cash, the poor and certain demographic groups bear a disproportionate portion of the cost to access cash. Nearly all households get cash from financial institutions, withdrawing bank balances and cashing pay cheques. Households with poor financial access are more likely to make purchases and pay bills in cash, requiring higher cash balances and greater risk. And after years of cash payments leave poor documentation of creditworthiness, cash-heavy households will face higher borrowing costs in the future. This paper explains which US households bear the greater portion of the costs and risks of cash. In the context of comparisons with more evenly cash-dependent economies, such as the emerging markets, the disproportionate spreading of the burden of the cost of cash in the US is even more worrying.
Human performance on perceptual classification tasks approaches that of an ideal observer, but economic decisions are often inconsistent and intransitive, with preferences reversing according to the local context. We discuss the view that suboptimal choices may result from the efficient coding of decision-relevant information, a strategy that allows expected inputs to be processed with higher gain than unexpected inputs. Efficient coding leads to ‘robust’ decisions that depart from optimality but maximise the information transmitted by a limited-capacity system in a rapidly-changing world. We review recent work showing that when perceptual environments are variable or volatile, perceptual decisions exhibit the same suboptimal context-dependence as economic choices, and we propose a general computational framework that accounts for findings across the two domains.
Trust in others’ honesty is a key component of the long-term performance of firms, industries, and even whole countries1, 2, 3, 4. However, in recent years, numerous scandals involving fraud have undermined confidence in the financial industry5, 6, 7. Contemporary commentators have attributed these scandals to the financial sector’s business culture8, 9, 10, but no scientific evidence supports this claim. Here we show that employees of a large, international bank behave, on average, honestly in a control condition. However, when their professional identity as bank employees is rendered salient, a significant proportion of them become dishonest. This effect is specific to bank employees because control experiments with employees from other industries and with students show that they do not become more dishonest when their professional identity or bank-related items are rendered salient. Our results thus suggest that the prevailing business culture in the banking industry weakens and undermines the honesty norm, implying that measures to re-establish an honest culture are very important.
This paper is the first to demonstrate, to our knowledge, that people audit the meaningfulness of their lives as they approach a new decade in chronological age, further suggesting that people across dozens of countries and cultures are prone to making significant decisions as they approach each new decade. The paper has broad implications for interdisciplinary science, because it demonstrates a striking pattern in human behavior that bears on, among others, the disciplines of psychology, medicine, sociology, economics, and anthropology.
Credit scoring is expanding into domains beyond lending. Today, credit scores are used by employers, utility companies, and automobile insurers to index high-risk behavior. Life insurance companies even incorporate credit scores into actuarial models. This expansion is controversial, as it is unclear what personal attributes credit scores capture. Following 1,000 individuals from birth to midlife, we show that low credit scores predict cardiovascular disease risk. We also show that the reason credit scores are broadly applicable as a risk stratification tool is because they capture enduring histories of human capital, beginning in childhood. These findings call attention to privacy concerns in a surveillance society, the value of financial literacy, and the importance of early childhood intervention to promote healthy aging.
People experience pain when they spend money. Because previous studies have shown that perceived social support reduces physical pain, this research examined whether perceived social support reduces spending pain. Our studies showed that both real and recalled social support reduced spending pain (Studies 1–3) and that perceived social support reduced the perceived importance of money as a protection mechanism, which in turn reduced spending pain (Studies 1 and 3). Moreover, the pain-buffering effect of social support was stronger for hedonic purchases than for utilitarian purchases (Study 2). This research broadens our understanding of the factors that enhance consumer experiences and the relationships among love, security, and pain.