How People's Motivational System and Situational Motivation Influence Their Risky Financial Choices

Abstract

People's preferences for risks have been a subject of interest to researchers in both the economy and psychology fields over the last few years. This has given rise to many important findings about the role of psychological factors that influence people's choices. The presented studies focused on the role of motivational systems (described by Higgins in the Regulatory Focus Theory) in explaining people's financial choices. The main goal was to examine the relationship between people's chronic promotion and prevention motivational system and their propensity to (1) invest, (2) undertake investment risks, and (3) assume financial risks in gambling tasks in both the gain and loss decision-making frame. Moreover, we aimed to investigate how chronic motivational systems confronted with situationally induced promotion and prevention motivation would affect people's propensity to invest and embrace financial risks. Two CAWI studies on a Polish national representative sample (N1 = 1093; N2 = 1096) were conducted. The second study consisted of two waves with a 2-week break. The studies provided evidence of higher chronic promotion motivation as well as higher prevention motivation associated with the propensity to invest; however, induced promotion motivation results in a lower propensity to invest compared to induced prevention motivation. Participants with an activated promotion system built more risky portfolios than individuals with an induced prevention system. Moreover, participants with a low chronic promotion system built more risky portfolios than individuals with a high promotion motivation system as long as their prevention system was also low. In terms of gambling decisions in both the gain and loss frame, a higher level of chronic promotion motivation and situationally induced promotion motivation were related to the preference for the non-sure option over the sure one.

The role of self-control and regulatory foci in money-saving behaviours among children

“…Children with induced promotion focus decided to save more often, while children with induced prevention focus chose immediate consumption more often. Previous research (Sekścińska et al 2016) revealed that both promotion and prevention orientations may support saving, but Cho et al (2014) showed that the final effect of regulatory focus on saving behaviour may depend largely on the regulatory fit between motivation of the person and the type of saving goal (promotion vs. prevention). Promotion goals relate to nurturance and growth needs (e.g., saving for buying/investing in one's own business, saving for travels, saving for buying a house, etc.)…”

“…It is worth noting that both promotion and prevention foci may facilitate saving behaviour but may have different consequences for the ways of delaying consumption. Recent research (Sekścińska et al 2016) showed that a higher level of promotion motivation was associated with the preference to delay consumption. The same preference presented people with higher prevention motivation.…”

“…Indeed, various studies pointed out that, in adults, the self-regulatory orientation (promotion or prevention) is related to individual economic behaviour (e.g., Förster and Werth 2007;Zawadzka et al 2012). One of the economic domains that can be influenced by self-regulatory foci is saving behaviour (e.g., Sekścińska et al 2016). It is worth noting that both promotion and prevention foci may facilitate saving behaviour but may have different consequences for the ways of delaying consumption.…”

“…However, people with different regulatory foci (promotion vs. prevention) prefer different ways of delaying consumption. Sekścińska et al (2016) showed that induced promotion motivation led to a higher propensity to invest money (allocating money to financial instruments that generate profits, i.e., stocks) but a lower inclination to save money (keeping the money in a nonprofitable form, i.e., non-interest-bearing bank account). It means that promotion focus is connected to meeting the growth needs and realisation of promotion goals (investing), while prevention focus is connected with the satisfaction of the safety needs and realisation of prevention goals (secure saving).…”

“…However, the situational regulatory focus may be influenced by the characteristics of the task (Liberman et al 2001;Shah et al 1998;Zhou and Pham 2004), and it can be induced by different priming tools, for example, by (1) different task frameworks: with gain or no gain (activation of promotion focus) and loss or non-loss (activation of prevention focus) information (Förster et al 2003), or (2) by activating knowledge structures that are related to nurturance needs (promotion focus) or security needs (prevention focus) (e.g., Friedman and Förster 2001). Taking into account that regulatory focus may be activated situationally in adults and may influence their economic decisions (e.g., Sekścińska et al 2016), in our research, we hypothesised that such activation may also influence economic behaviours of children. Although relatively long ago researchers (Mischel et al 1992) stated that children use different strategies in goal pursuit, there is a lack of studies on motivation in goal pursuit (i.e., regulatory focus) in children.…”