Independent Banker - August 2024 - 37

WHAT IS
BEHAVIORAL
ECONOMICS,
AND COULD
IT HELP YOUR
BANK GROW?
Much of our financial
decision-making is driven
by cognitive biases and
emotions-and behavioral
economics is the science
behind that. Learn more
about this field and how it's
driving some community
banks to introduce products
and services that engage
and attract customers to
make better decisions.
BY JUDITH SEARS
ILLUSTRATIONS BY ADAM HAYES
P
eople's fi nancial decisionmaking
can be a head
scratcher. Take savings,
for example. It's widely
reported that more than
half of Americans wouldn't have
enough emergency savings to cover
an unexpected $1,000 bill.
Are we all irresponsible? Are
the macro-economic obstacles so
insuperable? Or are there other
explanations for our failure to
plan ahead?
" Economics is not a linear
function of numbers; it's a living
discipline, because it incorporates
emotions and instincts of people
in the decision process, " says
Dan Geller, CEO of Analyticom, a
behavioral economics modeling fi rm.
The fi eld of behavioral economics
studies the cognitive biases
and emotions that shape our
decision-making much more than
we consciously realize. " Behavioral
economics is simply a marriage
between economics and psychology, "
Geller explains.
In the area of savings, a phenomenon
called temporal discounting helps
explain why we sometimes don't act in
our own best interest.
" Research shows that when we think
about ourselves in the future, our brain
lights up like we're thinking about a
diff erent person, " says Melina Palmer,
CEO of The Brainy Business, which
helps companies apply behavioral
economics. " If a person is thinking
about retirement or a car they'd like,
it's like asking somebody to care
about their future self. But when the
brain thinks, 'That's somebody else,
not me,' they are much less likely to
take action. "
Goalsetter, a family and youth
savings, investing and fi nancial
education platform, tackles temporal
discounting in one of its videos. In
the video, a young man packing for
independentbanker.org // 37

http://www.independentbanker.org

Independent Banker - August 2024

Table of Contents for the Digital Edition of Independent Banker - August 2024

Contents
Independent Banker - August 2024 - Cover1
Independent Banker - August 2024 - Cover2
Independent Banker - August 2024 - Contents
Independent Banker - August 2024 - 2
Independent Banker - August 2024 - 3
Independent Banker - August 2024 - 4
Independent Banker - August 2024 - 5
Independent Banker - August 2024 - 6
Independent Banker - August 2024 - 7
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Independent Banker - August 2024 - Cover3
Independent Banker - August 2024 - Cover4
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