Lookup NU author(s): Dr Wasim Ahmed
This is the final published version of a report published in its final definitive form in 2020. For re-use rights please refer to the publishers terms and conditions.
Many households do not possess the necessary savings to deal with unexpected financial events. People’s biases play a significant role in their ability to forecast future financial shocks: people are typically overoptimistic, present-oriented and generally underestimate future expenses. This project focusses on how scenario-based information can be used to nudge people’s financial awareness. Our scenario experiments examine how people change their financial projections in response to nudges in the form of new information on relevant risks. Participants are asked to forecast future expenses and future savings. They then receive information on potential events identified as high-risk, low-risk or no-risk. We investigate whether predictions are revised in response to various risk scenarios and how such potential adjustments are affected by the information given. Results reveal the important role that scenarios can play as reality-checks, leading to changes in initial forecasts, with different patterns observed for expenses vs savings projections. Our findings suggest that providing risk information via scenarios offers a prolific toolbox in designing nudges towards betterinformed financial forecasts and heightened financial awareness.
Author(s): Onkal D, Ahmed W, de Baets S
Publication type: Report
Publication status: Published
Online publication date: 09/01/2020
Acceptance date: 09/01/2020