1.02BM Your Brain and Money - Jennifer Pariseau | Biblioteka

Instrukcije

Learning Objectives

Students will be able to:

Explain what a cognitive bias is and how it can cause someone to make irrational decisions, particularly around money
Explore and experience a variety of cognitive biases

National Standards for Personal Financial Education

Investing

9a: Identify several behavioral biases that can result in poor investment decisions (e.g. loss aversion, mental accounting)
9b: Brainstorm methods for avoiding negative consequences from behavioral biases

QUESTION OF THE DAY: What percentage of people make purchases due to FOMO?

5 min

Answer the question on the first slide in the space below. Then, compare your answer to the answer on the second slide. Finally, follow your teacher’s directions on how to answer the follow-up questions on the last slide.

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What percentage of people make purchases due to FOMO?

VIDEO: FOMO: Our Relationship with Social Media 5 min The previous Question of the Day showed the power of FOMO, or the fear of missing out, and how it can influence our decisions around money. Watch this video to learn more about how FOMO can show up when we use social media, and what we can do to curb its impact on our choices. Then, answer the questions.

3

Describe a time FOMO has influenced a financial decision of yours. Were you happy with the decision? Explain.

2

Sam regularly uses social media and posts to his accounts multiple times a day. He realized he experiences a lot of FOMO while scrolling through his feeds and wants to try quitting social media overnight. What advice would you give to Sam? Explain.

REFERENCE: What is Cognitive Bias?

LIST: List of Cognitive Biases

6 min

So far, we’ve learned a lot about FOMO, which is a cognitive bias. So what exactly IS a cognitive bias? Review these slides to find out and skim through the list of biases to see just how many there are. Finally, answer the questions.

Link to Pic Below:

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1

Use the definition on the slide to explain what makes FOMO a cognitive bias.

1

If cognitive biases can cause us to make irrational decisions, why do they exist?

2

Skim through the list of biases. Does it surprise you that there are so many of them? Why or why not? (Note: there are many other biases that are not listed here!)

Move: FOMO and Cognitive BIas https://docs.google.com/presentation/d/1UktJpnVsU647Pvqj9zz1LqPLchldtr4LID31jkIo39o/edit?usp=sharing

3

What do you think about cognitive bias and spending money?

VIDEO: 5 Ways People Are Dumb with Money

11 min Now that you’ve learned about - and experienced - a few cognitive biases, let’s explore how these biases can impact our decisions specifically around money. Watch this video and then answer the questions.

2

How do behavioral economists view people differently than traditional economists?

2

How might businesses use cognitive biases to their advantage?

2

How do you think being aware of the various biases we have can empower us to make better decisions around money?

1

Behavioral economics…

Combines economics and psychology to study why people behave the way they do in the real world

Analyzes how different economies around the world behave over time

Tracks and examines stock market trends over a certain period of time

Is a field of economics that studies people who make rational and objective decisions

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Cognitive bias is…

The concept of placing more value on an item when we own it

The desire to seek out information that confirms our existing beliefs

An error in the way we think that can influence our decisions

The belief that our abilities are better than they actually are

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You go to a restaurant and order a big meal. Even though you’re full, you keep eating because it was expensive. This is an example of...

The Endowment Effect

The Sunk Cost Fallacy

Fear of Missing Out

Mental Accounting