What Are Households’ Biggest Mistakes When It Comes to Their Finances? An Interview with Harvard’s John Campbell

Nov. 08, 2024

How do personal beliefs and past experiences steer household finances? Harvard economist John Campbell sheds light on how our perceptions of the economy influence not just what we believe but how we act—or don’t—in the world of personal finance.

Harvard's John Y. Campbell, this year’s recipient of the Skandia Research Award on Long-Term Savings, discusses common financial pitfalls, essential advice for households, and what Sweden can learn from global mortgage systems.

From saving for emergencies to shopping for financial products better, Campbell’s insights offer a practical lens on finance and its complex role in household stability. Here are some key takeaways:

• There is a gap between people’s stated beliefs about the economy and the financial actions they take, often acting more conservatively than their beliefs suggest.
• Many households fail to save adequately for emergencies, leading to costly debt in times of crisis.
• People tend to learn from limited sources (personal experiences and social circles) rather than the broader financial landscape.
• Financial products are often not compared, leading to higher costs due to a lack of shopping around.
• Effective mortgage systems are simple, enabling consumers to compare options easily. Complex mortgage features can deter consumers from shopping around, leading to less informed financial choices.