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💰 The Psychology of Money

Why smart people make money mistakes, and how to outsmart your own brain.

lessons

~30 min

to learn

🔢 Math

subject

Adults

level

Start the course →

What you’ll learn

Identify loss aversion, framing, anchoring, and mental accounting in everyday money decisions.Prospect theory (Kahneman and Tversky, 1979) shows losses hurt about twice as much as equal gains feel good. Framing, anchoring, and mental accounting further distort our choices in predictable ways.
Recognize present bias, sunk costs, herding, and overconfidence and counteract them.We overvalue the present, throw good money after bad, follow the crowd, and overrate our own skill. These instincts drive classic investing mistakes like buying high and trading too much.
Use nudges, defaults, and automation to make good financial behavior the easy path.Nudges and automatic systems harness our biases rather than fighting them. Wealth comes from consistent, unemotional behavior, not from intelligence or stock-picking.

Questions this course answers

According to Kahneman and Tversky's prospect theory, how does the pain of a loss compare to the pleasure of an equal gain?

Loss aversion means a loss feels psychologically about twice as powerful as an equivalent gain.

Describing a surgery as '90% survival' instead of '10% mortality' is an example of which effect?

Framing shows that the wording of identical facts changes our decisions.

A store shows a high 'original price' next to a sale price to make the deal feel better. This exploits:

The first number we see anchors our judgment of value, even when it is inflated or irrelevant.

Choosing $100 today over $110 next week reflects:

Present bias is the tendency to overvalue immediate rewards over larger future ones.

Continuing to repair a dying car only because you've already spent a lot on it is the:

Money already spent is gone; only future costs and benefits should guide the decision.

Buying stocks at the top out of fear of missing out is an example of:

Herding is following the crowd, which often leads to buying high and selling low.

Grounded in trusted sources

Kahneman, D. & Tversky, A. (1979). 'Prospect Theory: An Analysis of Decision under Risk', Econometrica.
Kahneman, D. (2011). Thinking, Fast and Slow. Farrar, Straus and Giroux.
Thaler, R. & Sunstein, C. (2008). Nudge: Improving Decisions About Health, Wealth, and Happiness. Yale University Press.
The Nobel Prize in Economic Sciences 2002 (Daniel Kahneman), https://www.nobelprize.org/prizes/economic-sciences/2002/
Loss Aversion, The Decision Lab, https://thedecisionlab.com/biases/loss-aversion

Every Wunder lesson is built from real, reputable sources — never invented.

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