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Maria is very proud of herself for having $3,000 in her savings account that pays 3 percent interest. She currently has a balance of $1,800 on her credit card account that charges 18 percent interest. Maria thinks she is making a wise financial decision by keeping her money in her savings account instead of paying off her credit card balance. What financial principle from Chapter One would you use to give her good advice

Sagot :

Parrainidn

Answer: b. mind games and your money

Explanation:

This falls under Mental accounting where our minds play games with our money by dividing them into various accounts and uses based on our emotions.

Sunk costs play a big part in this because we get so attached to the accounts we have put a lot of effort in while neglecting those we have not or do not want to think about. Maria here is proud of her savings account so much so that she does not see the detrimental effect of not paying off the credit card debt which is rising rapidly.

Her savings account is now a sunk cost and she doesn't realize. This principle can help advise her so she understands the games her mind is playing on her and fix it before the damage gets worse.

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