Financial Literacy: Making Informed Personal Financial Decisions

Throughout our lives, we make many personal financial decisions and choices. These include preparing and adhering to budgets, taking out and repaying student loans, managing short-term debt (e.g., credit cards), financing major purchases (e.g., home mortgage loans), assessing the tradeoffs between consuming or investing (e.g., stocks and bonds), saving for retirement, estate planning, acquiring insurance (e.g., life and disability), and tax planning. The primary goal of this course is to provide you with the basics of financial literacy. Financial literacy is the possession of skills, knowledge, and behaviors that enable you to make informed personal financial decisions and choices. We will apply traditional (neoclassical) economic theory (rational choice theory). We will also apply concepts from behavioral economic theory (e.g. present bias and optimism bias) to understand why we do not always make rational personal financial decisions and choices. We will discuss how interventions (e.g., disclosures, nudges, and regulations) affect those decisions and choices.