Are you scared of losing money? Does loss feel personal to you? Has a fear of losing (or failing) stopped you from getting started in different areas of your life?
In our latest series, “Brain Hacks with Kate Campbell & Evan Lucas”, the duo discusses common behavioural biases impacting our financial futures and strategies to combat them. Just look for the š§ episodes every Wednesday.
Today’s conversation is all about loss aversion and how the fear of losing money can change how we make decisions.
šš½āāļø ASK KATE & EVAN A QUESTION: https://bit.ly/3QtiY00
What is loss aversion?
- Investopedia: āLoss aversion in behavioral economics refers to a phenomenon where a real or potential loss is perceived by individuals as psychologically or emotionally more severe than an equivalent gain.ā
- For example, the pain of losing $50 is often far greater than the joy gained in finding the same amount.
- BehaviouralEconomics.com says that: āIt is thought that the pain of losing is psychologically about twice as powerful as the pleasure of gaining.ā and āPeople are more willing to take risks to avoid a loss than to make a gain.ā
- The Decision Lab: āloss aversion gets stronger in individuals as the stakes of their choice grow larger.