3.1 The preference for bringing forward financial rewards and for delaying outlays

Evidence suggests that, given a choice, around a fifth of us would prefer to accept less money now as opposed to more money later. This was shown in a survey by the Money Advice Service (This Money, 2013), which found that one person in five would prefer to be given £200 today rather than £400 in four months’ time!

Figure 3

This preference also means that people prefer to delay payments rather than make them straight away. This behavioural trait to delay payments may lead to poor decision-making when paying for goods – for example, paying for car insurance in monthly payments over a year rather than in full at the point of purchase. If you pay in instalments over a year you are entering into a loan arrangement with the insurance provider. Given that the interest rate charged is commonly very high, choosing to pay in this way is usually a poor financial decision.