Our hardwired predisposition to live in a now can lead to adverse financial decisions. Can Behavioral Finance help investors bring the future into focus?
Part of the problem with saving is that people feel they put their money aside now for strangers to enjoy it in the future. They are disconnected from their future selves. By showing them the image of what they’re going to look like, they tend to connect to their future selves and save a lot more.
Hal E. Hershfield:
We use a combination of software and technology and even some computer scientists and graphic artists to help us create vivid realistic images of our research participants when they are about 68, 70 years old. What we saw again and again in these studies is that when people are exposed to their future selves as opposed to not being exposed to their future selves, they would allocate significantly more money or more of their paycheck out to these long term saving funds. And once that these people are willing to put about twice as much money into their retirement account. What we think is if we can impact people in that one moment when they are making this really important decision that’s good enough, now we’ve really done something to increase their savings over time.
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