There are certain indisputable and widely accepted financial principles, such as “it is advisable to save to deal with future setbacks”, “it is bad to live beyond our means”, or “it is not reasonable to be heavily indebted”. We are all aware of these principles and, despite this, millions of people, including those with high levels of education and a reasonable amount of disposable income, at some point fail to follow some of these fundamentals. If so, why is managing basic finances so difficult for many people? What can be done to help consumers make better decisions? The immediate response to these concerns has traditionally focused on the insufficient level of financial education among a large part of the population. In fact, in Spain, according to the PISA report ranking prepared by the OECD in 2015, nearly 25% of Spanish adolescents lack a reasonable level of financial competence, making it urgent to continue developing greater financial literacy among citizens.
For this reason, at the Spanish Banking Association, as well as in many other institutions in Spain, the importance of financial education has been emphasised as the most appropriate mechanism for citizens to have not only a better future but also financial freedom. In the same way, the financial sector needs users with adequate knowledge to make sound economic decisions that ensure a relationship of trust and transparency between banks and their customers.
Under this approach to the problem, it is assumed that, with an adequate level of financial training, individuals will be able to assess all the options available at a given time and make responsible decisions with confidence. However, there is a field of research that argues that there is a set of cognitive, psychological and emotional factors that lead consumers to behave unpredictably when faced with financial decisions, regardless of their level of training.
By chance, this year the Nobel Prize in Economics nomination received by Professor Richard Thaler coincided with Financial Education Week, a coincidence that helps to reinforce the link between behavioural theory and programmes aimed at promoting healthy finances. The behavioural economics literature to which Thaler has contributed in recent years shows that consumers are not fully rational agents who tend to make the best decisions or obtain the maximum return based on the best information available at any given time. On the contrary, consumers’ decisions on financial matters are riddled with unfounded behaviours.
