Today’s fantastic family finance article is:
The Cognitive Biases That Lead to Bad Money Decisions
Why do sailors drop anchors? So their boats won’t stray far from a spot.
It turns out sellers drop anchors too. And if you want your kids to be savvy consumers, they need to be aware of the technique. It’s called anchoring.
Anchoring relies on the fact that people are biased by the first piece of information they hear. That’s the anchor, and your brain tends to stay near it. Clever marketers use the maneuver all the time to make overpriced items seem reasonable.
Here’s how you can teach your kids the trick. Next time you’re in a restaurant, ask the kids to find the price on the menu that sticks out first. That’s typically the anchor price. It sets the expectation bar high. That way, anything nearby that falls below it seems much more reasonable. Even if it isn’t.
“Whoa, the steak sandwich is $25. This $15 bacon cheeseburger is a great deal!”
Not really. If you hadn’t seen the anchor first, you’d recognize it as a rip-off.
What’s the antidote for money anchors? Research. Coach your kids to figure out what a reasonable price is ahead of time.
That way, your kids will drop their own money anchors first, and sellers won’t be able to cast their finances adrift.
Get tomorrow’s tip here.
Post a Comment