Understanding Biases in Financial Decisions

Which of the following defines a bias?

• A choice made about spending money.

• A healthy debate about preferences.

• A preference based on unreasoned judgement.

• A summary of someone's financial performance.

Overconfidence is an example of:

• a personal preference.

• a cognitive bias.

• an experiential bias.

• a financial bias.

What percentage of Gen Z believes they'll achieve a higher standard of living than their parents?

• 75%
• 60%
• 40%
• 10%

Which of the following describes the bias known as mental accounting?

• Choosing the first or default option

• Thinking of your money in different buckets

• Not having a written budget

• Using professional accounting strategies for your money

What is one example of mental accounting?

• Using money someone gifted you to treat yourself

• Using money someone gifted you to repair your car

• Using money someone gifted you to pay student loans

• Using money someone gifted you to pay a utility bill

Which of the following is an example of a cognitive bias affecting financial decisions?

• Ignoring sunk costs when making a purchase

• Saving a fixed percentage of your income

• Spending more when using a credit card instead of cash

• Comparing prices before buying

What does the term 'mental accounting' refer to in personal finance?

• Hiring a professional accountant

• Investing only in stocks

• Separating money into categories based on its source or intended use

• Tracking all expenses in a spreadsheet

Which of the following best illustrates the impact of bias on financial behavior?

• Consulting a financial advisor for advice

• Reviewing multiple investment options before deciding

• Choosing to invest in a company because a friend recommended it, without research

• Setting up automatic savings transfers