20 financial myths about money

Unsecured debt is mostly a problem only for people with low incomes.

Correct answer: fiction

What my case shows

Debt does not equal poverty

In the case based on data from the Institute for Fiscal Studies, it is clear that a significant share of unsecured debt belongs precisely to households with above-average income. So debt is not only a story about lack of money, but also about liquidity (accessibility), financing style, and behavioral motives.

Trap: a class stereotype — mixing debt with chronic poverty.

Unsecured debt is also found among higher-income households.

If a person has money in their account, they will always immediately pay off expensive debt.

Correct answer: fiction

What my case shows

The buffer often beats arithmetic

In cases about savings, credit debt, and behavioral motives, it is clear that people often hold debt and a reserve at the same time. Arithmetically, it is more выгодно to pay off debt, but psychologically it is important not to lose the feeling of a buffer and control.

Trap: mental accounting and the price of a peaceful night’s sleep.

Having assets to repay debt does not always mean the debt will be closed immediately.

Anyone who has an emergency fund is already handling money wisely.

Correct answer: fiction

What my case shows

A reserve does not cancel out biases

An emergency fund really often reduces financial fragility and gives a greater sense of control. But it does not make a person automatically rational: anxiety, decision avoidance, or impulsive reactions may remain.

Trap: confusing the presence of a resource with the absence of behavioral mistakes.

A reserve reduces fragility but does not remove behavioral biases.

If a household has enough financial assets, it will not carry unsecured debt.

Correct answer: fiction

What my case shows

Assets do not guarantee the “perfect” decision

In the case based on reported findings, it is clear that more than half of households with unsecured debt had enough financial assets to repay it. But people do not always act according to the formula “I see debt — I close debt”: separately, there is the logic of liquidity (accessibility), fear of losing a buffer, and the habit of keeping everything in different “pockets.”

Trap: the rationalist illusion — thinking that people automatically choose the mathematically best option.

Some households have assets to repay debt, but do not do so.

Debt is mainly about poverty: as soon as incomes rise, debt disappears.

Correct answer: fiction

What my case shows

With income, debt does not disappear — it changes

In cases about income and debt, it is clear that as income grows, debt does not disappear automatically. Its structure, purpose, and context change: from covering shortages to being a tool of liquidity, consumption, or large purchases.

Trap: linear thinking — as if the “wealthy” automatically live without debt.

Debt does not disappear automatically with rising income or net worth.

How a person pays — cash, card, or phone — has almost no effect on the amount they spend.

Correct answer: fiction

What my case shows

The payment method changes the feeling of spending

In the case about the cashless effect, spending was lowest when paying with cash, higher with a card, and even higher with a phone. When contact with money becomes less tangible, spending becomes psychologically easier.

Trap: the illusion that the payment method is neutral and does not affect behavior.

Cash, card, and phone affect spending amounts differently.

Mobile payments do not change behavior — they are just a more convenient version of a card.

Correct answer: fiction

What my case shows

Even less friction — even easier spending

In the case about mobile payments, they led to higher spending than a card. The less “real” the moment of parting with money feels, the easier it is to go beyond what was planned.

Trap: underestimating the role of small frictions that restrain spending.

Mobile payments weaken the feeling of spending even more.

Buy now, pay later is just a technical payment format, not a behavioral trap.

Correct answer: fiction

What my case shows

Convenience also pushes decisions

In the case about “buy now, pay later,” users had higher average basket sizes and larger revolving debt balances. When payment is pushed into the future, the burden feels less tangible and saying “yes” becomes easier.

Trap: present bias — underestimating the future burden for the sake of convenience now.

BNPL is associated with larger basket sizes and higher debt balances.

If a country already has internet and smartphones, almost everyone uses digital finance.

Correct answer: fiction

What my case shows

Access does not equal habit

In cases about digital finance, it is clear that internet access alone does not guarantee active use of financial services. Trust, institutions, habits, the level of formal financial inclusion, and the country context all matter.

Trap: technological blindness — assuming access is a sufficient condition for behavior.

Internet access is related to digital finance, but does not guarantee its mass adoption.

In richer countries, people borrow less — they can afford to live without debt.

Correct answer: fiction

What my case shows

Prosperity does not mean a life without borrowing

In cases based on international data, it is clear that rising prosperity does not remove debt, but only changes its form. More income often means not the absence of credit, but a different type of credit activity.

Trap: the idea that financial capacity automatically leads to a debt-free life.

With higher prosperity, what changes is not the presence of debt, but its form.

The more Nicolas Cage films are released, the more people drown in swimming pools.

Correct answer: fiction

What my case shows

A good correlation can be complete nonsense

In my case, there is a chart where these two data series move almost together, but there is no real meaningful connection between them. This is a classic example of how numbers can look convincing even when the story behind them is absurd.

Trap: seeing a beautiful coincidence and automatically inventing cause and effect.

A strong correlation still does not mean a real connection between phenomena.

Margarine consumption can explain divorce rates in one American state.

Correct answer: fiction

What my case shows

Not everything that fits beautifully on a chart makes sense

In this case, the lines look as if margarine really “ruins marriages.” But in reality, it is a strong random coincidence, not evidence of a causal link — and that is exactly why it is so illustrative.

Trap: falling in love with a beautiful line on a chart and not asking whether there is a real mechanism.

Even an almost perfect correlation can be misleading.

Miss America’s age is related to the number of strange deaths from steam and hot objects.

Correct answer: fiction

What my case shows

Numbers sometimes invent stories better than people do

In the case, there is also a correlation between these indicators that looks very “serious.” But any causal explanation here sounds like fantasy rather than a scientific conclusion — and that is exactly the value of the example.

Trap: taking any story with numbers as truth if it looks good on a chart.

A beautiful chart can create the illusion of meaning where there is none.

People make money mistakes mainly because they lack information.

Correct answer: fiction

What my case shows

The problem is often not knowledge, but behavior

In my cases, it is clear that people make mistakes not only because of a lack of information, but because of procrastination, overconfidence, fear of loss, social comparison, and other biases. In other words, knowing “what is right” does not yet mean acting that way.

Trap: reducing complex behavior only to a lack of knowledge.

Behavioral biases are often stronger than the mere fact of knowing.

If you clearly explain to a person what to do with money, they will simply start doing it.

Correct answer: fiction

What my case shows

Understanding does not guarantee action

Cases about choice architecture show that even when everything is explained to people, they do not rush to change their behavior. Status quo, procrastination, fear of making a mistake, and extra steps are often stronger than a good instruction.

Trap: rationalist optimism — thinking that knowledge automatically turns into action.

People often postpone even the right action unless the choice architecture changes.

To make people save more, it is enough to give them the right choice — rationality will handle the rest.

Correct answer: fiction

What my case shows

The default option is often stronger than intentions

In the case about automatic enrollment into savings, participation rose sharply not when people were simply given options, but when the default scenario was changed. People often stay with what the system sets as the default.

Trap: underestimating the power of the status quo and default choice.

The default option dramatically changes participation in savings.

If there is an option to save more for retirement, people will actively choose it themselves.

Correct answer: fiction

What my case shows

The right option does not always mean an active choice

In the retirement savings case, contribution growth happened thanks to automatic steps and soft settings, not because people themselves massively switched to the better option. The mere existence of an option does not yet change behavior.

Trap: overestimating active decisions and underestimating inertia.

The mere presence of a good option does not guarantee that it will be chosen.

In finance, the more self-confidence, the better.

Correct answer: fiction

What my case shows

Overconfidence can also be harmful

In the case about financial confidence, what looked best was not extreme self-confidence, but a balanced level of confidence. Confidence that is too low paralyzes, but confidence that is too high pushes people to overestimate their abilities.

Trap: overconfidence — seeing it as a pure resource rather than a double-edged sword.

Balanced confidence works best, not excessive confidence.

One general “pot” of money works just as well as several separate “envelopes.”

Correct answer: fiction

What my case shows

Dividing money into “envelopes” really changes behavior

In the case about one shared account and separate “envelopes,” people with mentally or actually separated funds saved differently and spent differently. Formally, the money is the same, but the way it is psychologically organized affects decisions.

Trap: ignoring mental accounting and assuming all money is perceived the same way.

The mental division of money changes spending and the tendency to save.

If a person is very frugal and constantly restricts themselves, it almost always means financial maturity.

Correct answer: fiction

What my case shows

Sometimes “frugality” is not stability, but anxiety

In cases about scarcity thinking, it is clear that strict self-restraint does not always mean healthy financial maturity. Often behind it is not strategy, but a constant fear of not having enough and an inner feeling that it is safe only when you allow yourself almost nothing.

Trap: confusing caution with living in a mode of inner scarcity.

Strict self-restraint may come from anxiety, not a mature strategy.