effects of unrealistic optimism and threatening self esteem

Another practical implication relates to splitting savings into different categories, and by using different wordings: A financial advisory institution can help people in their financial behaviour by focusing on 'targets', and by encouraging (nudging) people to make breakdown forecasts rather than general ones.ĭespite widespread exposure to substantial medical expenditure risk in low-income populations, health insurance enrollment is typically low. Notably, we found an adjustment effect even in the no-risk category, suggesting that governments and institutions concerned with financial behaviour can increase financial awareness merely by increasing salience about possible financial risks. Our findings suggest that the provision of risk information alters financial forecasting behaviour. We investigated whether they adjusted their predictions in response to various risk scenarios or not and how such potential adjustments were affected by the information given. They then received information on potential events identified as high-risk, low-risk or no-risk. Participants were asked to forecast future expenses and future savings. Our experimental scenarios examined how people change their financial projections in response to nudges in the form of new information on relevant risks. Additionally, the study steers away from the standard default choice architecture nudge, and adds originality by focusing on eliciting implementation intentions and precommitment strategies as types of nudges. While of great practical importance, the role of nudging in behavioural financial forecasting research is scarce.

Specifically, we contribute to the literature by exploring the concept of 'nudging' and its value for behavioural changes in personal financial management. The purpose of this study is to investigate how varying risk information influences people's financial awareness, in order to reduce the chance of a financial downfall. People's biases play a significant role in their ability to forecast future financial shocks: they are typically over-optimistic, present-oriented, and generally underestimate future expenses.

Many people do not possess the necessary savings to deal with unexpected financial events.

Effects of unrealistic optimism and threatening self esteem