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 🧠 episodes every Wednesday.
Today’s conversation is all about loss aversion and how the fear of losing money can change how we make decisions.
🙋🏽♀️ ASK KATE & EVAN A QUESTION: https://bit.ly/3QtiY00
What is loss aversion?
- Investopedia: ‘Loss 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.’
- For example, the pain of losing $50 is often far greater than the joy gained in finding the same amount.
- BehaviouralEconomics.com says that: ‘It is thought that the pain of losing is psychologically about twice as powerful as the pleasure of gaining.’ and ‘People are more willing to take risks to avoid a loss than to make a gain.’
- The Decision Lab: ‘loss aversion gets stronger in individuals as the stakes of their choice grow larger.
