Mind Your Money SDA brief 2016/17

Christy McAleeseHead of Financial Capability

Citizens Advice

Sept 14, 2016

Overview

• Citizens Advice – debt & money work

• RSA Social Brain team’s work

• Mind Your Money brief: • Financial capability• Behavioural hurdles

• Potential submissions

Applying a modern understanding of human nature to policy and practice, to address various social challenges…

RSA’ Social Brain team

What is the Problem?

Sources: https://www.citizensadvice.org.uk/Global/Public/Impact/Citizens-Advice-Impact-report-2015_16_digital.pdf

https://www.jrf.org.uk/press/almost-four-ten-families-children-are-struggling-make-ends-meethttps://www.moneyadviceservice.org.uk/en/corporate/the-financial-capability-of-the-ukMoney Advice Service. Misunderstanding Financial T&Cs. 2014 DWP as cited in Money Advice Service. Consultation response. 2015

We’re struggling to manage our money well…• Nearly 1 in 3 clients had less money or escalating financial

difficulties

• People are struggling to pay for the basic costs of living

• 4 in 10 households with children live below the Minimum Income Standard. (Over 8 million people)

• 4 in 10 are not adequately prepared for retirement

So what?• Life skill

• Opportunities

• Wellbeing

What is financial capability?

• Within budget

• Managing debt wellManaging money

day-to-day

• Saving regularly

• Protecting assets

Resilience to shocks

(higher expenses, lower income)

• Protecting dependents

• Saving for retirementPlanning for the

future

Financial Capability: having the knowledge, skills and mindset to take action

Behavioural Hurdles to Financial Capability

Cognitive Overload

When we have a lot on our mind we tend to pick the simplest option, which is not necessarily the best one…

… what could help people to:- Clear some headspace? - Defer complex decisions? - Get a second (trusted) opinion?

Empathy Gaps

In the heat of the moment we sometimes spend very differently to what we want to spend when in a 'cool state', and it can be hard to predict by just how much…

… what could help people to:- Stick to a commitment made in a cool state? - Better predict how they might feel in a hot/cold state and plan

accordingly?

Optimism and Overconfidence

Unrealistic expectations about the future can affect money management and leave you unprepared for a change in circumstance…

… what could help people to:- Make more realistic expectations - Consider a range of costs and plan conservatively

Instant Gratification

It can be hard to wait for 'something better' in the future. This can lead to impulsive spending, or missing out on good investments…

… what could help people to:- Consider what they could do with their funds by waiting

(opportunity cost) - Feel better about putting money away for a future opportunity

instead of spending it now- Avoid impulsive spending

Harmful Habits

When something becomes a habit it can feel like it happens automatically or mindlessly…- without consideration- repeated events have repeated effect on the wallet…

… what could help people to:- Avoid the triggers that cue the habit- Substitute the reward for a less ‘harmful’ one- Start ‘good’ financial habits

Social Norms

What other people do matters; it affects our own actions (consciously or subconsciously).Spending and consumption is visible. Saving and insurance is less visible and therefore less catchy…

… what could help people to:- Use social pressure to their advantage- Make good financial behaviours more visible- Change the social norms around a given activity- Change the relationship between people and banks

Responding to the Brief Keeping in mind the behavioural hurdles, think of ways to make it easier or more attractive to be financially capable.

Who is your target audience and what might be standing in the way of their financial capability?

DOconsider

• A product or service that makes it easier to…

• keep track of money,

• make ends meet,

• bounce back from nasty financial surprises, or

• save for the future

• A product or service that makes it easier to…

• Engage with financial institutions (banks)

• Improves trust in financial institutions (banks)

• A way to improve people’s financial skills

DON’Tconsider

• An information campaign. (Unless you can design it in such a way as to change behaviour.)

Behaviour Change Resources• Wired for Imprudence: behavioural hurdles to financial capability and challenges

for education. Report by the RSA. Includes executive summary and references.• The psychology of financial capability and what it means for financial education.

Blog post summarising the main points of Wired for Imprudence. • Money Advice Service. Website for “free and impartial money advice, set up by

government”.• Why We Make Bad Decisions About Money (And What We Can Do About It).

Video of Daniel Kahneman. • Save More Tomorrow. Short description and video of the Save More Tomorrow

programme, designed by behavioural economists Shlomo Bernartzi and Richard Thaler. This programme is an example of using behavioural insights to help people to save more for retirement.

• Behaviour Change tips for Beginners. Blog post by Marketing for Change.• ‘Designing for Behaviour Change: 6 Tips for Students’ RSA blog series by guest

blogger Tori Flowers of Shift Design.• EAST: 4 simple ways to apply behavioural insight . Report by the Behavioural

Insights Team (Spoiler alert: make it Easy, Attractive, Social, Timely)