Management Sciences and Quantitative Methods Commons^™

Exponential Growth Bias Matters: Evidence And Implications For Financial Decision Making Of College Students In The U.S.A., Bryan Foltice, Thomas Langer

Scholarship and Professional Work - Business

This paper tests the exponential growth bias of undergraduate students at a top-level university in the United States and explores the potential drivers of this bias. We find that bias matters, even for college students, in making savings and debt decisions. In this sample, we observe that the individuals who have already taken on debt are more biased, while those who have experience with savings products are less biased. Moreover, those classified as possessing an awareness of compound growth as well as an ability to consistently calculate the compound savings equation are significantly less biased in different savings treatments than …