Simplifying financial descriptions to improve financial outcomes

Framing Effect and Financial Products
Intervention Financial Products

How simplifying terms and phrases improve financial behavior

Intervention Description

Researchers framed management fees in different ways in order to determine if the framing of management fees changed the decision making fo financially illiterate workers in Mexico. In order to simplify management fee information, fees were translated into pesos instead of the traditional fee measurement of annual percentage rates. Mexican workers who were financially illiterate were much more likely to attend to the fees when they were presented in pesos rather than in the form of annual percentages. This change in behavior resulted in improved financial decision making.