Speaker: Dr. Beatriz Pereira, Monash University
Title: Windfall Moments: Framing Tax Refunds to Increase Financial Well-Being
Date: Thursday, 8 August 2024
Time: 12:00pm – 2:00pm
Venue: Building 21, PAP Moran, G058, Seminar Room
Kimin Eom is the host of this visitor
Abstract:
Once a year, millions of taxpayers receive a substantial tax refund that they must allocate between spending, saving, or debt. Prior research supports financial advisors' guidance that consumers should consider a tax refund as ordinary income (earned money being returned) rather than windfall income (unearned money being given) if the goal is to discourage spending of the refunded money and promote healthy financial habits. However, our research indicates that the contrary holds for consumers who are financially vulnerable due to being in debt or having low financial self-efficacy.
A field experiment and one laboratory experiment with consumers with credit card debt showed that windfall (vs. ordinary) income tax return frames directed at debt repayment were more effective among low financial self-efficacy consumers. We hypothesized that consumers perceive windfalls (vs. ordinary income) as a unique opportunity to make more progress toward their debt repayment goal, which was confirmed in a follow-up lab experiment. Another field experiment, including both indebted and debt-free consumers, revealed that framing a tax refund as windfall (vs. ordinary) income increased the likelihood of individuals setting a financial goal to pursue. A final lab study showed that the successful use of windfall frames to reduce debt requires explicit encouragement to direct efforts to debt repayment. Without this encouragement, low financial self-efficacy consumers were more likely to allocate the refund to more salient goals, shifting from spending to saving rather than debt repayment.
Bio:
Beatriz Pereira is a Senior Lecturer in the Marketing department at the Monash Business School, Monash University. Her primary research area is consumer behaviour and well-being. Specifically, her work focuses on empowering individuals and guiding policymakers to improve consumer welfare through goal-directed behaviours. Her recent research addresses issues in health and financial decision-making, political polarisation, product scarcity, and consumer vulnerability. Her work has been published in the Journal of Consumer Psychology, Psychology & Marketing, Journal of Consumer Affairs, PNAS, and other academic journals.