The messy realities of financial decision making and the policy implications for reducing financial vulnerability

Following the 2008 Global Financial Crisis, the financial security of individual consumers has been viewed as vital to economic stability. Policy makers have focused on developing financial literacy to ensure the public has the financial capability needed to underpin ‘good’ financial decisions and avoid becoming financially vulnerable. However, this approach has been criticised for not fully considering the behavioural factors that influence how consumers manage their money. Through a qualitative study of consumer financial decision-making, we gain deeper empirical insights into the emotions, context, and other behavioural factors which drive financial behaviours. We contribute conceptually by extending thinking on ‘muddling through’ decision- making to the personal finance context, revealing showing that what consumers consider to be rational may not align with an economic view of rationality. Questions are raised about whether whether current policy is sufficiently aligned with the factors driving consumer financial behaviour and the implications are considered.