Focus Shift: Financial Matters Extend Beyond Individual Sphere
In a recent study at Kellogg School of Management, economists and faculty discussed the far-reaching effects of personal-finance decisions. These decisions, they found, ripple out, affecting not just individual bottom lines but also merchants, communities, and consumer behavior.
One of the key findings of the study was the surprising benefits of using debit cards. According to Kellogg's Sean Higgins, a switch from cash transfers to debit cards reduced spending and increased savings among Mexican households. This shift in consumer behavior could lead to a potential benefit for the community, as consumers might start to favour smaller retailers.
The study also shed light on the role of debit cards in political popularity. Increased usage of debit cards could have benefits beyond the original intent, such as political popularity among richer households that pay a larger share of taxes.
Economist Benjamin Harris suggests that starting to save for retirement early, ideally from birth, is crucial for financial security in old age. Meeting employer's 401(k) contribution is one of the steps towards achieving retirement goals, according to Harris.
The study led by Kellogg's Sergio Rebelo used a framework on decision-making popularized by psychologist Daniel Kahneman. During hyperinflation, consumers tend to make smarter decisions due to the need to save money. This mental taxing nature of thinking deeply about choices might encourage consumers to make wiser decisions even in normal economic conditions.
In the realm of relationships, a study by Kellogg School professor Eli Finkel showed that a joint bank account can help couples align their financial goals and preserve their relationship, especially during the first years of marriage. Couples who merge all their money into a joint account do not exhibit the same declines in relationship quality and show greater financial harmony, according to Finkel. On the contrary, couples who maintain separate accounts or are left to their own devices show significant declines in relationship quality over time.
The effect of a joint bank account on preserving relationship quality was bigger than expected in Finkel's study. Not only did marital quality not decline, it might have even increased slightly for couples with a joint bank account. However, the search results do not provide the names of the authors of a study investigating how the introduction of joint bank accounts in married life can improve relationship quality.
Payment networks such as Visa, Mastercard, and American Express use rewards to compete for customers and fund those perks by increasing the fees they require merchants to pay, according to Lulu Wang, an assistant professor of finance at Kellogg. Credit-card rewards are funded by increased fees charged to merchants, which ultimately may lead to higher costs for consumers.
In conclusion, the study on credit and debit cards provides valuable insights into the ripple effects of personal-finance decisions. From promoting smarter consumer decisions to improving relationship quality, the findings of these studies offer practical advice for individuals and communities alike.
Read also:
- Deepwater Horizon Oil Spill: BP Faces Record-Breaking Settlement - Dubbed 'Largest Environmental Fine Ever Imposed'
- Cars' Environmental Impact Explained
- Lawsuit of Phenomenal Magnitude: FIFA under threat due to Diarra's verdict, accused of player injustice
- Union IG Metall advocates for a swifter expansion of electrical mobility in the Eastern region.
