Michael King, Anuj Pratap Singh, 14 December 2018

Financial products with a cashback feature are increasingly popular, but typically cost consumers more in the long run. This column shows that consumers who are younger and less educated, and those affected by present bias and inattention, are more likely to choose more expensive 'cashback mortgages'. Advanced behaviourally informed disclosure improves consumer decision-making. Advertising in the form of a 'negative nudge' or sludge, however, encourages prospective buyers to choose more costly mortgages. 

Romesh Vaitilingam, 06 September 2017

Although we like to see ourselves as sensible and logical decision-makers, studies show that our decisions are driven by many other (often subconscious) factors. The Think Forward Initiative is exploring how people can be empowered to make better financial decisions. This column summarises findings presented at the Initiative’s second Summit, which focused around three broad themes: daily financial affairs; finance for the future; and financial literacy.

Romesh Vaitilingam, 17 November 2016

It is questionable whether the lessons from the relatively new field of household finance have been reflected to any great extent in the way that the banking and financial services industry works. This column introduces the Think Forward Initiative, which seeks to build a bridge between research and action. A better understanding of how and why people spend, save, invest and hold assets can act as a springboard for action to help consumers.

Yoshihiko Kadoya, Mostafa Saidur Rahim Khan, 01 October 2016

Economists increasingly emphasise the role of financial literacy in explaining savings, investment, and retirement planning decisions. This column uses data from a nationwide survey in Japan to investigate the relationship between financial literacy and late-life anxiety. Financial literacy appears to reduce anxiety by making people both financially and psychologically prepared for old age. 

Michalis Haliassos, Phil Thornton, 15 April 2016

Most people misthink financial matters, basing decisions on many factors beyond cold rational logic. This column discusses a new effort – that draws on insights from several disciplines and new data sets – to find ways of helping people better manage the challenges and risks of their personal financial decisions. 

Dirk Niepelt, 21 January 2015

Recent experience with the zero lower bound on nominal interest rates, and the use of high-denomination notes by criminals and tax evaders, have led to revived proposals to phase out cash. This column argues that abolishing cash may be neither necessary nor sufficient to overcome the zero lower bound problem, and would severely undermine privacy. Allowing the public to hold reserves at central banks could reduce the need for deposit insurance, although the transition to the new regime and the effects on credit supply must be carefully considered.

David Love, 27 January 2014

Recent research on financial literacy casts doubt on the ability of households to make well-informed financial decisions on their own. This column presents research on optimal rules of thumb for saving and asset allocation. There is a trade-off between complexity and efficiency of financial advice, and there are many examples which show that a simple rule can do almost as well as a complicated one.

Tabea Bucher-Koenen, Annamaria Lusardi, 19 November 2011

We live in financially compromised times – but how many people understand them? This is especially problematic when it comes to people’s own finances. This column presents findings from a study in Germany that does not make for comfortable reading.

Tullio Jappelli, Mario Padula, 08 February 2011

Previous research has suggested that low levels of financial literacy can often be blamed for poor financial decisions by individuals, with knock-on effects for the wider economy. This column adds empirical evidence based on cross-country aggregate and micro-data, showing that indeed countries with higher financial literacy also have higher saving rates and greater wealth.

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