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Financial decision-making capabilities

One reason 70% of people are in debt is that they haven’t learned from experience how to make decisions well. 

How can we improve financial decision-making capabilities? 

Values are important for motivation. But, don’t confuse “personal values” with “what a sub-section of society value”.  It’s not about imposing should’s (“you should work hard”, “should get a steady job”).  It’s about finding out what actually motivates the person.

There’s evidence that working at something you value personally is more satisfying. So, let’s imagine you’re ten or fifteen years older and are looking back over your fantastic success. You’re interviewed by your favourite interviewer on TV. 

What do you tell them you’re proudest of? What have you’ve achieved? That’s your personal value.

Better financial decision making

Teaching better decision making is too complex, we have to focus on particular financial issues.

You can target problems with strategies (i.e. there are methods to help people make better decisions) and that training can help – so you can train them.

Budgeting skills

Skills like budgeting are what people need, so general decision making can be learned from that.

There are hundreds of ways to budget suited to different situations. Who says the one you teach (or the one they remember, if they remember) is going to work for them in their situation in ten years’ time? If you do it that way, the people you teach:

  1. don’t know which one to use in a given situation (like learning statistical formulae and not knowing which one to use for real work, because all the practice in learning them was a series of questions on a particular formula).
  2. can’t remember it, because at the time it didn’t seem relevant, there’s not enough motive to remember
  3. it’s out of date, since 10 years after you teach kids about finding the best mobile phone the technology is different, nobody wants a phone (they have implants), there have been 3 changes of Government and 13 budgets and all the laws, taxes, protection and everything they can remember (if anything) is irrelevant.

Prioritisation Skills

If you teach prioritisation skills, people can work out what they really want (from a phone, a degree or a house). Then separate wants from needs for their own unique personality. 

Judgement Skills

If you teach judgment, they can understand how they, personally, tend to make decision errors – are they too emotional, jump to conclusions and ignore evidence or do they try to be too scientific, make up complicated formulae that are actually meaningless but give them a false sense of accuracy (what happened to LTCM, look it up; also true of the basic investment theory used in markets, MPT).


Or do they make different sorts of error in different situations?  If you teach about values, they can work out what they really want, and what their real goals are. A

Kim Stephenson is a qualified and experienced financial adviser, a Chartered Occupational Psychologist and tutor in post-graduate neuroscience. He’s the author of two books, Taming the Pound and Finance is Personal.  He can be contacted through the website or at