Are You an Ostrich of Money?
When was the last time you checked your bank account?
As explained in the Copenhagen Business School and Columbia Business School working paper , if you are like many people, chances are you expected to be happy with what you saw. And if you were expecting a low balance, well, you might not want to see it at all.
As MarketWatch explains,
The findings confirm previous research on the so-called “ostrich effect” – a concept of behavioral economics that suggests investors will avoid negative information based on the myth that ostriches bury their heads in the sand to avoid danger. “People log in because they like to see money in their bank accounts,” the researchers write.
The report shows that consumers are significantly more likely to log into their financial accounts on payday, and the likelihood of verification increases with the expected money.
And this is problematic for many reasons, the most important of which is to ignore your potential financial problems – to bury your head in the sand – they will not disappear. Instead, you can exacerbate them by increasing your overdraft fees or leaving your balance below the required minimum .
But ostriches can affect your life in a different way. For example, a general advice on personal finance blogs is to be completely honest with yourself about your spending habits and what to give up. A typical suggestion is to go through the latest bank statement and highlight the extra expenses, then close a deal to actually stop wasting money on these things or in these stores. But how often do we actually do it and why do we avoid it? We just don’t want to know.
And while it would be great if more money magically appeared in our bank account to cover the additional costs, it really won’t. If we want more money, we need to be honest with ourselves and really make sacrifices. And this means that we must fight our habits directly, and not headlong into the sand. You cannot afford to be an ostrich.