Making Financial Decisions

ngpf.org Last Updated: 11/3/26

High School Personal Finance: Semester Course

Learning Objectives

Students will be able to…

Explore strategies to overcome cognitive bias

Apply the PACED method of decision making

Practice making financial decisions and consider tradeoffs

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Intro

Intro: Common Financial Decisions

Imagine you’re 22 years old. Choose one of the common financial decisions below.

• Where to live: You can’t quite afford the home of your dreams yet. How do you make it work - Roommates? Compromise on location? Stretch your budget?
• How to handle debt: You’re making the monthly payments on your student loans ($10,000) and your auto loan ($8,000). You’ve been spending more on your credit card, and the debt has added up ($3,600).
• How to spend your weekend: You have $500 in a “fun money” savings account. You really want to see a concert with friends. Between tickets, hotel, food, and gas money, you expect it to cost $650 each.
• How much to save: You’re earning $40,000 and living in an apartment with a roommate. How much do you save each month (for emergencies & retirement)?
• Choose a phone: Your phone is getting old and the screen has a minor crack. Do you keep using it, repair it, or buy a new phone?

Intro: Common Financial Decisions

a. What is your gut instinct approach to this situation?

Sentence Starter: My gut instinct would be to…

b. What are some other options you might consider?

Sentence Starter: I could also…

Learn It

Overcoming Cognitive Biases

You’ve learned how cognitive biases shape the way we think about the world. Now, learn strategies to combat those cognitive biases. Watch the video and answer the questions.

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VIDEO: Introduction to Cognitive Bias: Crash Course Scientific Thinking #1

Overcoming Cognitive Biases: Strategies

The video offers these three strategies to combat cognitive bias. Circle one strategy and explain why it’s important.

1. Accept that bias is real and look out for its influence on your decisions
2. Interact with lots of people, especially people who are different from you
3. Practice cognitive flexibility: imagine explanations beyond your gut reaction

Sentence Starter: It is important to __________ because …

Overcoming Cognitive Biases: Finances

Apply the main idea from this video to personal finance. What is one way you could try to lessen the impact of cognitive biases on your finances?

Sentence Starter: I could try to lessen the impact of cognitive biases on my finances by…

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ARTICLE: The PACED Decision-Making Framework

When making important decisions, it might help you to use a structured framework. The PACED method is a step-by-step process for making informed and thoughtful decisions. Here are the steps:

1. Problem�State the problem.
2. Alternatives�List the alternatives. What options/ actions are you considering?
3. Criteria�List the criteria. What is important to you when making this decision? Which criteria are the most important?
4. Evaluation�Evaluate the alternatives. Assess each alternative based on each criterion.
5. Decision�Compare the alternatives to choose the best one. Consider: what would you gain or give up with each? Which option has the highest ranking on your criteria?

Example: Choosing a Dinner Option

The PACED method uses a grid to compare options. Here’s a simple example:

Problem: You need to decide what to do for dinner tonight.

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Decision: You decide to have a quick dinner with the groceries you already have in your pantry. It scores the highest overall because it’s cheap, fast, and good enough.

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Apply the PACED Method

Look back at the scenario you chose in the INTRO. What are 3 criteria that would be important to you when making that decision?

Sentence Starter: When deciding ________, the most important criteria for me would be…

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PACED Method Use Cases

For which types of problems do you think the PACED method would be the most helpful? Least helpful?

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Sentence Starter: The PACED method is probably the most helpful for problems that…��It is probably the least helpful when…

Do It

Activity: The Bean Game

Follow the instructions for this game to explore how your personal experiences and values affect your money management decisions, particularly when resources are tight.

Worksheet: PLAY: The Bean Game

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Exit Ticket

Exit Ticket 1: Cognitive Biases

Which of the following is TRUE about cognitive biases?

1. It is easy to recognize when cognitive biases are influencing our own decisions
2. There is rarely anything you can do to combat a cognitive bias’ influence
3. There are only a handful of cognitive biases that exist
4. Awareness is often the first step to overcoming the influence of a cognitive bias

Exit Ticket 2: The PACED Method

Which of the following correctly outlines the steps of the PACED method?

1. Prioritize, Access, Consider, Educate, Design
2. Prioritize, Analyze, Compare, Evaluate, Design
3. Problem, Alternatives, Criteria, Evaluation, Decision
4. Problem, Action, Comparison, Extension, Decision

Exit Ticket 3: The Fear of Missing Out

Mina wants to start using an investment app that all of her friends are raving about. She hasn’t done any research on the app, but she trusts her friends’ judgment. At home, Mina’s mom points out that Mina is being influenced by FOMO and herd mentality.

All of the following are things Mina can do to overcome these cognitive biases EXCEPT…

1. Take time to reflect and identify why she is so eager to use the app
2. Watch a positive video about the app, download the app, and start using it that day
3. Ask people outside her friend group for their opinions and perspectives
4. Seek out reviews that talk about the disadvantages of using the app