Financial Wellness Meets Behavioral Economics

Financial Wellness Meets Behavioral Economics: Helping Participants See the Big Picture and Act on It

 

What American workers need in the 21st century is a financial wellness platform that not only makes it easy for them to see the big picture but to also act upon it.

This paper outlines a new approach, informed by behavioral economics, that minimizes the problem of narrow framing. For instance, it explains how workers can be nudged to save for emergencies, thus helping them avoid cashing out their retirement savings during a financial shock. It also outlines sample interventions that can be used to help people reduce health care costs.

Narrow framing is one of those psychological tendencies that is becoming more relevant and costly in the 21st century. This is largely because our financial lives are increasingly complex and interconnected, and generally require a clearer sense of the big picture.

 

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Dr. Benartzi is a paid consultant to Voya Services Company, a wholly-owned subsidiary of Voya Financial.

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