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Financial Rules of Thumb: A Review of the Evidence and Its Implications

Lookup NU author(s): Professor Darren DuxburyORCiD

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Abstract

This report evaluates the evidence regarding financial rules of thumb, developing a robust collection methodology in order to consider what personal finance heuristics exist and are used in the wider economy.Chapter 1 presents an introduction to rules of thumb, including the factors which necessitate their existence. Complexity and how we perceive time are discussed as providing a decision-making environment amenable to the use of rules of thumb. In order to develop and assess rules of thumb, this understanding is crucial.Chapter 2 evaluates common financial rules of thumb against the key success factors of satisficing, framing, default options, simplicity, uncertainty and transparency. This chapter also provides a typology of financial rules of thumb, the components of which are assessed as a counter to their driving bias. This provides insight into the design process.Chapter 3 discusses evidence relating to the design, communication and application of rules of thumb for personal finance and their implications for designing new financial rules of thumb.

Publication metadata

Author(s): Whittle R, Duxbury D, Werner K, Simister J

Publication type: Report

Publication status: Published

Series Title:

Year: 2017

Pages: 46

Online publication date: 01/09/2017

Acceptance date: 01/09/2017

Institution: Money Advice Service

URL: https://masassets.blob.core.windows.net/cms/files/000/000/805/original/RoT_Evidence_Review.pdf

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