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Financial Literacy

Why Do We Turn a Blind Eye to Financial Matters?

November 6, 2023Back to Learning Centre
Youval Aberman, PhD
Youval Aberman, PhD

How often do you think about improving your financial situation? If you’re like most people, the answer would be “quite often”. We wish to have more money to enjoy novel experiences and other things we desire, frequently making sacrifices in other areas of life (such as sleep or time with our loved ones) to better our financial health.

As much as we are drawn to money, it seems we also possess a tendency to shy away from it. We may avoid taking actions that could enhance our financial well-being, or even avoid looking at our finances altogether. This raises an intriguing question: If money serves as a potent motivator, why do we sometimes hesitate when it comes to addressing personal financial matters?

Money induces stress

One primary reason for our avoidance of personal financial matters is the discomfort associated with thinking about money. The fear of not meeting financial obligations or not saving enough for the future can be highly stressful. In fact, a recent survey revealed that finances were cited as the most stress-inducing aspect of life for 40 percent of Canadians, surpassing health, professional, and relationship stressors 1.

When faced with distressing thoughts, one coping mechanism is to pretend they don’t exist. This behaviour is not limited to finances. For example, some may try to manage their weight while avoiding stepping on a scale, treating it as their lifelong enemy. Similarly, people might experience symptoms that may indicate a serious underlying health issue but refuse to get tested. When it comes to financial decision making, behavioural researchers have identified that people tend to avoid checking their investment portfolios during market downturns2. This cognitive bias is known as “the ostrich effect”3, stemming from the mistaken belief that ostriches bury their heads in the sand when sensing danger.

Alternatively, we might cope with stress-inducing thoughts by replacing them with more comforting ones. This technique, known as Cognitive Restructuring, can effectively dismantle irrational fears. However, it can also lead us to take an overoptimistic view of reasonable worries. For instance, if we are living beyond our means, we might tell ourselves that something will come up to turn the situation around or attribute our financial difficulties to external factors (such as the state of the economy) rather than examining our own behavior. This optimism bias has been associated with suboptimal financial decision making; for instance, overoptimistic investors are less likely to find financial advice appealing4.

Ultimately, both the optimism bias and the ostrich effect may temporarily shield us from uncomfortable thoughts but keep us stuck in place.

Money is complicated

Would you rather have a million dollars today or have a penny that doubles every day for 30 days? While a penny today does not sound like much, its magical properties would yield over 5 million dollars by the 30th day. This classic example illustrates that improving our financial situations often involves making decisions that can appear counterintuitive at first.

Although we may have a basic understanding of concepts like compounded interest and exponential growth, we often fail to realize how small interest rates can have a substantial impact on long-term earnings. A few percentage points of return on an investment may seem underwhelming to us. Similarly, we might overlook the exorbitant interest rates associated with a new credit card that offers enticing sign-up bonuses simply because we do not fully comprehend the implications.

The magical penny also exemplifies that improving our financial situation require patience and self-control, characteristics that mortal humans are not particularly equipped to deal with. The famous “marshmallow test” , where children are offered a choice between getting a treat or waiting as little as a few minutes to receive an additional treat, has been extensively studied in the context of delayed gratification and its impact on various aspects of life, including finances.

In summary, our attitude towards financial matters involves a delicate balance between desire and hesitancy. While we are drawn to its potential rewards, we also shy away from addressing our financial matters as they can be stress-inducing and involve complex and often counterintuitive decisions.



1. FP Canada 2023 Financial Stress Index. June 15, 2023.

2. Karlsson, N., Loewenstein, G., & Seppi, D. (2009). The ostrich effect: Selective attention to information. Journal of Risk and uncertainty, 38, 95-115.

3. Galai, D., & Sade, O. (2006). The “ostrich effect” and the relationship between the liquidity and the yields of financial assets. The Journal of Business, 79(5), 2741-2759.

4. Lewis, D. R. (2018). The perils of overconfidence: Why many consumers fail to seek advice when they really should. Journal of Financial Services Marketing, 23, 104-111.

Youval Aberman, PhD
Written by Youval Aberman, PhD

Youval is an Associate at the behavioural research firm, BEworks. With a passion for helping individuals lead more meaningful lives, his work includes promoting sustainable lifestyles, enhancing financial decision-making, and fostering community engagement. Youval holds a PhD and MA in Experimental Psychology from the University of Toronto and a BA in Psychology from Columbia University.