Dr. Shlomo Benartzi penned another outstanding article in a recent Wall Street Journal entitled, “The High Financial Price of our Short Attention Spans”.
The use of a mobile device can be counter productive to good decision making about money, posits Dr. Bernartzi. He makes a very good case to back up this claim.
Effective decision making about money, he says, typically requires information, concentration and reflection. It is difficult to associate those words with normal use of a digital device-they seem to be drowning us in information constantly.
Multitasking gets in the way of good decision making about finances. Dr. Bernartzi compares the decision to have a piece of cake when we are supposed to be on a diet to the constant trade-off decisions we make about finances. Spend or save? Cake or not? Most people make the wrong decision and multitasking makes it worse.
If you have to make an important financial decision, he proposes, turn off your mobile device or at least put it in “do not disturb” mode.
Most certainly you know someone who checks the value of their portfolio and their rates of return on their phone at least once a day. That dangerous behavior can impede positive results. Research shows that after the Israeli government prohibited retirement funds from displaying returns for periods shorter than 12 months, investors reacted by trading less and taking smarter risks.
Dr Bernartzi teamed up with John Payne of Duke University and their research showed that people tend to perform worse on a test of financial literacy when given the test on a mobile device. Other research has shown that merely having your device near you can diminish your cognitive capacity. Next time you meet with your financial advisor, have everyone put their phones in another room. See how that may improve your communication skills and possibly lead to better decision making.