Watch this video on FOMO: Our Relationship with Social Media.

What is behavioral economics?

The study of how irrational factors affect individual’s economic decisions

Discuss the questions below.

• Describe a time FOMO has influenced a financial decision of yours. Were you happy with the decision?
• Sam regularly uses social media and posts to his accounts multiple times a day. He realized he experiences a lot of FOMO while scrolling through his feeds and wants to try quitting social media overnight. What advice would you give to Sam? Explain.

What is cognitive bias?

A systematic error in thinking that occurs when people are processing and interpreting information in the world around them and affects the decisions and judgments that they make… Everyone exhibits cognitive bias.

At their core, cognitive biases are our brain’s attempt to be efficient and make decisions quickly. They serve as mental shortcuts so that our brains can speed up information processing.

However, in trying to increase efficiency, these biases can create systematic errors in our way of thinking. This is because they rely on our perceptions, observations, and experiences and not on actual facts.

These biases can lead us to avoid information that we don’t like or don’t want to see. Additionally, they can cause us to see patterns that don’t exist.

Skim through this list of cognitive biases. Does it surprise you that there are so many of them?

Play Kahoot!

Watch the video entitled 5 Ways People Are Dumb with Money.

Discuss the questions below.

• How do behavioral economists view people differently than traditional economists?
• How might businesses use cognitive biases to their advantage?
• How do you think being aware of the various biases we have can empower us to make better decisions around money?

Learning Targets:

• I can explain what a cognitive bias is and how it can cause someone to make irrational decisions, particularly around money.
• I can explore and experience a variety of cognitive biases.