When Choosing to Do Nothing is Good For You

Sometimes choosing to do nothing can be good for you – it can even save lives. A paper by Eric Johnson and Daniel Goldstein titled Do Defaults Save Lives? examined the organ donation consent rates across European countries. In the table below you can see there is a significant variation between some of them. Why do you think this would be?

It all comes down to how the consent form is written. In those countries in the Blue, the Default or Do Nothing option is that you intend to donate your organs. In the Gold countries, choosing to donate your organs meant you had to Opt In – actually make the choice to donate.

Dan Ariely, Professor of Psychology and Behavioral Economics at Duke University suggests the reason is not necessarily down to laziness or because people don’t care. It is that when faced with a hard emotional decision, people don’t know what to do so they adopt the default.

An example of how Defaults are used in the financial world is life insurance through a super fund. Many funds contain a default level of cover based on age. For example, a 35 year old female may have $150,000 of Life and Disability cover once an account is opened.

The fund tells you – getting cover is easy – you’re automatically approved when you join. You can choose not to have this cover but the catch is – you have to fill out a form and send it to them to cancel it. Now many people need this cover, especially if it is the only life insurance they have. But I’m willing to bet the take up of the default cover is very high because most fund members simply do nothing.

How could this apply when we think about saving money? Compulsory super acts as a default saving mechanism albeit without the ability to opt out. What would the level of retirement savings look like if you weren’t forced to contribute a percentage of your salary?

Could you use this concept to help you with your day to day saving? Do you find yourself spending your pay each month then hoping to save what is left over? What if you decided on your own personal default position – 5% or 10% of every dollar you earn is invested for the future. Year in/year out – no chopping and changing.

Would your financial future look brighter?


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