Section 1: Behavioral Finance
Behavioral finance is a field that seeks to find explanations for, and
solutions to, the seemingly irrational financial decisions that people
often make. For years, despite spending millions annually on employee
education designed to encourage better savings an...
✓ Numerous studies have shown that financial education does not
necessarily produce improved financial behaviors and outcomes.
Moreover, financial stress is at an all-time high for workers. Why doesn't
traditional financial education work? There are, potentially, several
reasons: 1. Good participant intentions often don't translate to actions.
Inertia favors inactivity. 2. The information quickly becomes outdated
with the proliferation of new financial products. 3. A "one-size-fits-all"
approach, generally, does not work. 4. The information does not
effectively address why seemingly rational investors make irrational
systematic errors when making financial decisions. 5. The employees'
cost of other benefits squeezes out 401(k) savings.
Why Education isn't Working
✓ The reality is that human beings struggle with complex financial
decisions - and the traditional approach to retirement plan education
presents them with a series of unknowns, and for many, unknowable,
decisions, including: • How much can I afford to save? • How much do
I need to save? • How much of that savings should be pre-tax? • How
should I invest that savings? • Who should be my beneficiary? • What's
a mutual fund? • How do I fill out this complicated form?
Behavioral Hurdles
Master01 | October, 2024/2025 | Latest update
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