This article was published in TSE science magazine, TSE Mag. It is part of the Autumn 2025 issue, dedicated to finance and money. Discover the full PDF here and email us for a printed copy or your feedback on the mag, there.
Education, qualifications, and financial resources form the foundation of a strong future. But to make the most of them, we also need to understand how we make decisions, especially under pressure. This can be just as life changing as learning how to manage money itself.
Making informed financial decisions starts with understanding how our minds process risk, reward, and time. Which patterns of thought help us? Which ones lead us astray? Even well-informed people can make financial mistakes. Behavioral economists have shown how the brain often relies on mental shortcuts, known as heuristics, which allow for fast, intuitive decisions. While these shortcuts can be useful, they can also lead to errors, especially in complex situations when it is better to slow down and think more carefully.
In my own research, we found people tend to misjudge wealth, focusing on visible assets even when these are offset by significant debts. This “leverage bias” was stronger when participants relied more on intuitive thinking. Those who engaged in more reflective thinking made more balanced financial judgments.
Financial knowledge is important, but so is the ability to recognize when our thinking is rushed or biased. Being able to pause and shift into a more reflective mindset can make a real difference in everyday economic decisions.
