Hyperbolic discounting: Turning goldfish into squirrels
Goldfish are known for their inability to think ‘beyond the now.’ They don’t consider the future or remember the past. They just swim in circles. At the other end of the spectrum, squirrels are all about the future. They know ‘Winter is coming,’ so they collect and store a cache of nuts to enjoy in the comfort of their homes.
It turns out that when it comes to saving for retirement, people are more like goldfish than squirrels.
It’s only logical that the more you save for retirement when you’re younger, the better off you’ll be later in life. That’s how compounding interest works. So why don’t people actually do that? Why do they act like ignorant goldfish, waiting until their forties or fifties to start thinking about retirement, then furiously squirrel away all they can in a desperate effort not to retire on cat food? It’s just not logical.
This is where we have a problem. Financial services companies are undisputed experts in managing money, but the products, services and financial models they provide are based on the assumption that people will act rationally. What these firms are not so good at is understanding the nuances of human behaviour, or the context in which we live.
QSuper set out to further enhance their understanding of the real needs of their members by embarking on a project to determine the real needs of their membership base, so that they would be better able to support them in preparing for the future.
Join us to hear how we approached the ‘wicked problem’ of understanding how people really manage their money, then set about creating and communicating a design framework that accounts for their behavioural biases.
