If women ran the economy

None of us women dare stick our pretty necks out and say this, naturally, but we loved Charlie Brooker's recent rant in the Guardian:

We don't need a few women in conspicuous positions of power scattered here and there - we need a 10-year prohibition on all forms of male power. Seriously: a decade in which men don't get to control anything, from the remote control upwards. Imagine the consequences. For one thing, there would be an instant and massive reduction in armed conflict around the globe. Sure, nations would routinely bitch about each other in secret (and with a new, hair-curling viciousness), but there'd be fewer intercontinental punch-ups and a far smaller bodycount. The economy should clearly be run by women. City boys are dicks, plain and simple. Look at them. Listen to them. Consider the carnage of the past 10 years. What the hell were these idiots thinking?

Bring back Charlie's Angels, there'd be a rush to sign up.

Baffled by pensions?

If so, Simonne's tracked down a really useful site for women in need of some clarity about pensions. Or who need help making a decision relating to a state, occupational or private pension.

The Pensions Advisory Service (TPAS) now has a free helpline dedicated especially to women.

TPAS is an independent non-profit organisation that provides free advice and information on the whole spectrum of pensions. You can call them on 0845 600 0806.

Parents pay their money and take their choice....

The tug-of-war between the left (logical) and right (intuitive) sides of the brain is played out in all kinds of financial scenarios.

Take the case of the Israeli child-care centre that decided to fine parents who turned up late to collect their kids*. Before parents who were late picking up felt guilty, having inconvenienced the teachers. After the fine was introduced late pick-ups actually increased. Parents saw it as a service for which they were willing to pay.  The fine was intended as an emotional move to punish parents for lateness, it was interpreted more logically, as a means of exchange.

Clearly a larger fine was needed. That way the pain felt by the right brain would have ruled out such a logical but unintended outcome.

*Mentioned this week in Michael Sandels' first Reith lecture

The 8 most common money mistakes

Our June newsletter features the 8 most common mistakes that women make with money. These are the ones that come up time and again in our Sheconomics research and when talking to women about their money management. They are: 

1. A misplaced sense of loyalty. Whether it’s a mortgage, bank account or mobile phone contract, women are often reluctant to switch.
2. Fear of financial products. Liking tangible investments, such as property, over stocks and shares can mean women miss out on money-making opportunities.
 
3. 
Being money martyrs. While it’s important to look after the children, it doesn’t help anyone in the long run when women constantly sacrifice their own needs for the kids.
4. Low self-belief. Not asking for money – pay rises/fee increases/better deals – often means women don’t get what they’re entitled to.
5. Letting shopping become an emotional habit. Shop because you need the goods, not because you need the buzz.
6. Not managing career break finance. A career-break needn’t mean a pension break. If your partner’s salary can cover two pensions, it’ll ease the strain in later life.
7. Allowing others to make the big financial decisions. Women are great at day-to-day budgeting but can sometimes suffer from decision paralysis when it comes to bigger financial decisions.
8. Indulging in rescue fantasies. Don’t wait for someone to come and save you – make sure you’re ready to leap into action to rescue yourself.

 

 

Psychological bias=more credit card interest

Financial rules in the U.K. mean that credit card companies have to take a minimum payment from card-holders each month. It's meant to keep card-holders from getting into too much debt. 

Yet there's a psychological decision-making bias known as "anchoring" that operates against this. 

The compulsory minimum payment leads many card-holders to pay less off their balance than they would have done, thus costing them more in the long-run.

Researchers from Warwick University conducted a survey of 248 credit-card users and their statements and found those card-holders (36 per cent) who paid more than the minimum payment but less than the total balance, were influenced by the size of the minimum payment. The lower the minimum amount, the less they paid. It's as if knowledge of the minimum payment reduced how much they chose to pay off. 

In a further experiment hundreds of participants were given a credit-card bill with an outstanding balance of £435.76 and asked how much they could afford to pay off, given their real-life finances. Half saw a minimum repayment amount and half didn't.

Seeing a minimum payment amount didn't affect the proportion of participants who said they'd pay the balance off in full. However, of those who said they'd pay only some of the bill, the minimum payment amount had a dramatic effect on how much they said they'd pay. In real life the difference could double the ultimate amount of interest paid by the card-holder over the life of the debt.

Anchoring was first shown by Kahneman and Amos Tversky in 1974. They asked people to spin a random number wheel before estimating what proportion of United Nations countries were African. People's guesses were strongly influenced by whether the wheel landed on a high or low number, even though they knew the number had nothing to do with the question!

The researcher Neil Stewart has set up a website that helps you calculate what the total costs of a loan will be given how quickly you choose to pay off your debt.

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