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“It’s What I Do, Not Who I Am”: A Behaviorally-Informed Hypothesis

By Sean Luechtefeld on 03/29/2012 @ 05:00 PM

Tags: Financial Capability

In a brilliant display of nerd-dom, my friend, Jade, and I had a discussion at the dinner table the other night about the ways in which people make sense of their financial situations. Though perhaps geeky, it got me thinking about how service delivery should be informed by how people perceive their financial behavior.

Let me explain.

The conversation actually started in relation to our students. In addition to both working in the assets & opportunity field, Jade and I also teach at the University of Maryland. We were discussing some of the things that motivate our students. For example, when a student fails an exam, how do you encourage them to move forward and think about preparing well for the next exam, rather than dwelling on the last exam. The conclusion we came to is that students need to recognize that failing is something they did, but it isn’t who they are. In other words, they’re someone who struggled with an exam; they’re not an all-out failure. As another example, students who cheat – and get caught – ought to be told that they’re a student who made a bad decision, not that they themselves are cheaters. Unfortunately situations like these are just that: unfortunate situations. They do not define the entirety of one’s character.

This led Jade and I to think about the same logic applied to individuals and families who struggle financially. Indeed, we talk about the notion of financial literacy, suggesting that those who lack financial education are somehow illiterate. Of course, that’s not true, and in most cases, those who struggle with making on-time bill payments or who find it difficult to save are by no means incapable. They may struggle, but when it comes to managing resources, everyone is capable to some degree.

If you agree with this premise – and you may not – then doesn’t it make sense to ensure that people working to improve their financial futures can do so by encouraging them? Wouldn’t clients be better served by understanding that they are people who struggle with money, rather than financially illiterate or incapable? Research finds that the power of affirmation is undeniable; that when positioned to believe they are capable of making good financial decisions, even those with limited means can make strides toward financial stability. Of course, quite the opposite is also true; if someone believes they are destined to face financial hardship forever, then they no longer feel empowered to make well-informed financial decisions to begin with.

Of course, I readily admit that this is more a hypothesis than anything else. Nevertheless, it leads me to wonder: what would a behaviorally-informed research experiment that tests this hypothesis look like? Moreover, is there research that tests this hypothesis already? If you have answers to these questions – or want to play devil’s advocate – use the comments below.


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