Prof. Dan Ariely of Fuqua School of Business at Duke provides an entertaining 15 minute lecture on the pain we experience when we buy things which shows how psychology impacts how we spend money.  He shows how that pain differs based on the method and timing of payment as well as the hassle component associated with payment.  He demonstrates ways that we can increase our pain (and thereby control our spending) by paying with cash, getting notifications whenever we spend or increasing the salience of an expense.  He also helps answer a question about “What makes a great gift?”

Discussion ideas:

• Ask the students to watch the video, take notes and identify how they incorporate these ideas into their daily lives.
• When do students feel the most pain when paying for something?  Least pain?
• Can students come up with examples of how companies might use this knowledge about human psychology to their advantage?

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.