Responsible finance - Finance for all: Take control of your finances
The theme of this year’s Financial Education Day, held on 5 October, was “Responsible finance - Finance for all”. In this post, we further explain how that idea is expressed in the relationship between customers and banks, and in the need for all of us to manage our finances responsibly.
In this series, we have already discussed the responsibility of banks and customers when arranging a loan or credit, and talked about sustainable finance. We would now like to show how responsible finance involves exercising our responsibility and even controlling our impulses. In the last post of the series, we are going to discuss behavioural economics.
Every day, we make decisions that affect our finances. When we choose whether to pay in instalments or upfront, when we decide on how much we need to save or when we choose one product over another. We are unconsciously influenced by trends and biases that can distort a sound decision. That is why we want to show you a series of daily situations and tips that will help you control and minimise this effect and become financially more responsible:
When you set out to buy a product or a service, you’re influenced by the way in which it is presented to you. The order, form, and communicator of the message, along with the context, all help create a “framing effect”, which is used in marketing to bias your decision. Don’t be taken in by this effect:
Although financing your purchases of consumer items is an option, ask yourself if it is really necessary. When you buy something, you may feel relief at not having to pay for it all at once, so you tend to defer or group together payments (to soften their impact) and give less thought to the act of paying (using cards instead of cash, to make it less painful). All this seems to encourage the use of credit, particularly if it is card-based. To avoid this, we suggest that you:
Have you ever gone on a spending spree? We can all succumb to spur-of-the-moment spending, preferring the immediacy of the present to an uncertain future. To prevent this from affecting your long-term saving, we suggest that you:
- Set aside a fixed percentage of your monthly income for saving.
- As an incentive, use this calculator to determine your future income if you start saving today.