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PART 1: Your Money and You
After this lesson, you will:
Reflect on their personal values and how they can influence their financial decisions
Explore how values differ from person to person
Explain some reasons why people make irrational decisions, particularly around money
One thing that people have in common is that they get money and they spend money.
But everyone spends it differently. Some same more, some spend more.
Some buy only things they need, while others like to have their luxuries.
What kind of spender are you?
FOMO is the "Fear of Missing Out".
We are social creatures (well, most of us), and missing out on ways to connect with others can make us act irrationally. And help us get into money trouble as well.
Consider these questions:
Can you think of a time FOMO has influenced a financial decision of yours. Were you happy with the decision?
Do you think social media influences your buying decisions? More so or less than television?
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PART 2: Cognitive Biases and Financial Decisions
After this lesson, you will:
Explain some reasons why people make irrational decisions, particularly around money
Explore and experience a variety of errors in reasoning (cognitive biases).
Define common cognitive biases humans have and explain how they might influence someone’s financial decisions
Who wants to buy this dollar bill?
We are going to have an auction for this dollar.
The only rules are:
The highest bidder wins the dollar and pays their bid.
The second highest bidder wins NOTHING but still has to pay their bid.
What was the high bid? Did the result surprise you? This video explains what can happen in situations like this.
So most people spend their money wisely?
With so many people in debt, probably not.
Psychologists think they understand some of the reasons why people make poor decisions.
It's called behavioral economics.
Errors in reasoning can lead to poor financial decisions. People can reason irrationally due to the way they perceive reality. These errors in reasoning are called COGNITIVE BIASES. There are tons of these, and you might have a few of them yourself. Below are a few cognitive biases that can influence the way you think when you are making financial decisions.
Loss Aversion
Herd Mentality
Confirmation Bias
Overconfidence
Endowment Effect
FOMO
Sunk Cost Fallacy
Hedonic Adaptation
You will be given a set of cards with the definition of these cognitive biases and another set of cards with examples of how they could influence financial decisions.
Your task is to match the name with its definition and an example of it.
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