Financial Behavior Theory

Financial Behavior Theory examines how individuals’ emotions, beliefs, and social influences affect their financial decisions and actions. It recognizes that people do not always act rationally when managing money; instead, they may make choices based on cognitive biases, such as fear or optimism. This theory helps to understand why people save, invest, or spend the way they do, considering factors like risk perception and personal values. By studying these behaviors, we can better understand economic trends and improve financial decision-making, ultimately leading to more effective financial education and policies.