Video Resource: Are Investors More Spock or Homer Simpson?
A cautionary “Simpsons” and “Star Trek” analogy pretty much sums up the power of behavioral economics, said University of Chicago’s Richard Thaler, who’s widely regarded as the founding father of the discipline.
Traditional economic theory assumes a person is “super-rational, has no self-control problems, never has a hangover, saves exactly the right amount for retirement and then invests it perfectly,” Thaler said Monday on CNBC’s “Squawk Box.”
Have your students summarize the video in one sentence. Then ask them how this insight will impact their decisions about money. Hint: Where possible, make it automatic. For example, take a percentage of your paycheck and transfer it into your savings account, invest for retirement through a 401(k), etc.
Check out this NGPF Activity on Calculating Compound Interest
About the Author
Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.