Feelings and Choice
Our inability or reluctance to make very important and inevitable financial decisions is shocking, especially when no one else can make such decisions for us. Conventional wisdom blames this on a lack of financial literacy, and difficulty calculating the consequences of financial choices. But recent research by Professor Punam Keller indicates our emotions are the real culprits. Her research sheds light on how anger, sadness, anxiety, fear, and other negative emotions make us see red instead of green; and why women face bigger challenges in this regard than men.
In a series of dramatic (and often puzzling) health and financial decisions involving risk, she demonstrates how our active emotions make us act irrationally. The solution is to shift the spotlight on managing anticipated emotions, especially regret. Professor Keller will share “Enhanced Active Choice” (EAC), a communication tool she developed that can be used within DC plans. EAC manages active emotions by increasing the salience of future regret aversion. Professor Keller will demonstrate how EAC can be used to steer people who procrastinate, or who have made poor financial choices, in beneficial directions – enhancing enrollment, increasing participation rates, and reducing leakage.
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- September 26, 2018 Create Date
- January 21, 2020 Last Updated