The economic psychology of financial decision-making and money management in the household

This chapter focuses on intimate relationships and families. In doing so, it explores the private household from the economic psychologist's perspective, concentrating on two specific domains of research, namely, financial decision-making and money management. The household is an important analytic unit for economists because the decisions made in private households often have financial repercussions on a public (i.e., aggregate) level. As such, the household has attracted much attention in economics where it is assumed to be a fairly straightforward, single decision-making entity. One study provides empirical evidence in support of the claim that a couple's prior decision history is crucial for understanding specific spending decisions. It demonstrated that 'utility debts' play a role in the household economic decision-making process, suggesting that partners who have dominated a previous decision are usually required to yield in a subsequent purchase decision. In other words, the potential 'utility gains' made by dominating a spending decision.