Why making good financial decisions can be hard

 

If you want to lose weight, you just eat less and move more. It’s that simple, right?

Is it the same with making good financial choices? You might have all the facts about what are good and bad decisions when it comes to your money.

So, it should be easy to stay in control of your finances and have good savings. Correct?

But for many people, it’s not that easy. That’s because when it comes to our financial behaviour, it can be complicated. There are many factors that contribute to how we behave - it’s not just about the knowledge we have.

That’s what experts discussed at the Commission for Financial Capability (CFFC) Summit, held in Auckland this week.

“It’s not just about how we think, it’s about how we feel,” when it comes to our financial behaviour, says Celestyna Galicki, a research analyst at the CFFC.

People might have all the facts and know deep down what’s best when it comes to their spending, she says.

“But people don’t always act in rational ways. Psychological factors have an impact on how we process information.

Galicki used the comparison to weight loss to explain the complex factors around financial literacy in New Zealand.

The environment and community we live in, knowledge - or potentially lack of, government policies and our culture play a part in our approach and attitude towards money.

“All of that affects in different ways what people do,” Galicki says.

And how you feel about your finances isn’t as related to income as you might expect, she says.

People who earn a lot can still feel poor, or not positive about their financial situation.

They can also make not-so-good money decisions.

Associate Professor Carla Houkamau, of the University of Auckland, spoke about recent research which focuses on how culture plays a part when it comes to the financial literacy of Maori.

She’s working on two studies to shed light on how culture impacts the attitudes of Maori people toward money management, wealth, and savings, with research results due soon.

This week’s summit explores ways to improve the financial capability of New Zealanders, covering topics such as research and behaviour, KiwiSaver, FinTech, and emergency savings.

Those attending include people from government sectors, community groups, and education areas.

First published 12 June, 2018

Story by Claire Connell

JUNO does not contain financial advice as defined by the Financial Advisers Act 2008. Consult a suitably qualified financial adviser before making investment decisions. This story reflects the views of the contributor only. Content comes from sources that JUNO considers accurate, but we do not guarantee that the content is accurate.


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