MisIvy Reittie, NHRC Outreach Manager
April 16, 2024

On March 14, 2024 NHRC hosted a webinar on how people make financial decisions. When it comes to financial behaviors, we often overlook the underlying psychology, focusing more on perceived motivation and unmet achievements. Everyday people navigate choices amidst various scarcities, reacting quickly or deliberately based on available resources and environmental influences.

In her presentation to the NHRC Leaders in Housing Counseling Webinar on “Understanding How People in Poverty Make Financial Decisions,” Crystal C. Hall, Assistant Professor at the University of Washington’s Evans School of Public Policy and Governance, stressed the importance of integrating psychology into program design and how this connection can create better outcomes to understand what motivates people.

Referencing Daniel Kahneman’s “Thinking, Fast and Slow,” highlighted the two decision-making systems:

  • System 1: Fast, unconscious, prone to errors.
  • System 2: Slow, conscious, reliable but effortful.

Despite alternating between both systems, individuals in poverty may struggle to access System 2 due to resource constraints, (not enough income for expenses, lack of access to childcare, etc.). This underscores the need for programs to consider audience mindsets and barriers to decision-making, enabling practitioners to offer holistic support.

When designing programs, it’s crucial to consider people’s mindsets and what obstacles they’re facing. Understanding these stressors helps us plan short-term solutions that align with what’s realistically achievable. Tactics like clear communication and addressing loss aversion positively shape behavior. For example, messaging that highlights losses is more effective than messaging that highlights gains. Loss framing drives action better than gain framing, even when presenting identical information. Therefore, focusing on potential losses resonates more deeply with people.

Even small details, such as default options, can significantly impact decision outcomes. Default options are pre-set choices that are automatically applied if a user doesn’t make a selection. They’re the options already chosen unless the user specifies otherwise. For instance, in software installation, default options might include installing additional components unless the user deselects them. Default options can significantly influence user behavior and decision-making because people tend to stick with the default rather than actively choosing an alternative. This holistic approach to understanding human behavior helps recognize that people in poverty are capable of making sound decisions but may act impulsively when resources are lacking.

Lastly, there is a need to address the intersectionality of deeper systemic issues like structural racism and poverty, which often go unacknowledged in policy design. By framing conversations with personal, engaging communication and understanding motivations, policymakers can craft more effective solutions that address people’s challenges; bridging the gaps to create more compassionate, inclusive solutions.

For deeper insights, you can view Crystal C. Hall’s presentation on our Leaders in Housing Counseling Webinar that offers valuable perspectives on integrating these concepts into organizational practices.