Use loss aversion, mental accounting, present bias, anchoring accurately in context
Read and discuss a topic-specific article at B2 level
Practise speaking fluently on behaviour, bias, and financial decision-making
Complete written exercises with vocabulary in context
Teaching Notes
Warm-up: allow 8-10 min, let personal answers develop
Article: read together or have students read silently first
Vocabulary match: good for pair work
Speaking: encourage full sentences, not one-word answers
Exit questions: 5-min closer, no prep needed
Timing Guide
Warm-up: 8 min
Article + comprehension: 12 min
Vocabulary + match: 10 min
Exercises: 10 min
Speaking + discussion: 15 min
Exit + recap: 5 min
Teacher Question Bank
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B2 · Lesson 33 · Behaviour, Bias, and Financial Decision-Making
The Psychology of Money
Behaviour, Bias, and Financial Decision-Makingloss aversionmental accountingpresent bias
Getting started
Warm-Up Questions
Click the button to get your first question
Read & Understand
Article
The Psychology of Money
Behavioural economics has fundamentally challenged the classical assumption that humans make financial decisions rationally. Daniel Kahneman's research showed that losses feel approximately twice as painful as equivalent gains — a phenomenon called loss aversion. This explains why investors hold losing stocks too long and sell winners too early. Sunk cost fallacy leads people to continue failing projects because of what they have already invested, ignoring the forward-looking logic that should govern decisions. Present bias makes saving difficult: the future self is psychologically distant, so immediate gratification wins again and again. These biases are not signs of stupidity — they are features of human cognition. Understanding them is the first step to making better decisions.
💡 Did you know? Daniel Kahneman won the Nobel Prize in Economics in 2002, despite being a psychologist — the first psychologist ever to receive the award. His work with Amos Tversky essentially created the field of behavioural economics.
Topic: Behaviour, Bias, and Financial Decision-Making
Key words
Vocabulary
01
loss aversion
the tendency to feel losses more strongly than equivalent gains
02
mental accounting
the tendency to treat money differently depending on its source or intended use
03
present bias
the tendency to prefer immediate rewards over larger future rewards
04
anchoring
relying too heavily on the first piece of information encountered
05
heuristic
a mental shortcut that allows quick decisions but can lead to errors
06
overconfidence
an excessive belief in one's own knowledge or abilities
07
sunk cost
a cost already paid that should not influence future decisions but often does
08
framing effect
the tendency for decisions to be influenced by how choices are presented
09
compound interest
interest calculated on both the principal and the accumulated interest
010
rational
based on logic and evidence, not emotion
Match the Words
Click a word on the left, then click its definition on the right.
loss aversion
mental accounting
present bias
anchoring
heuristic
overconfidence
sunk cost
framing effect
compound interest
rational
the tendency for decisions to be influenced by how choices are presented
relying too heavily on the first piece of information encountered
the tendency to prefer immediate rewards over larger future rewards
interest calculated on both the principal and the accumulated interest
an excessive belief in one's own knowledge or abilities
a cost already paid that should not influence future decisions but often does
based on logic and evidence, not emotion
a mental shortcut that allows quick decisions but can lead to errors
the tendency to feel losses more strongly than equivalent gains
the tendency to treat money differently depending on its source or intended use
Say it right
Pronunciation
loss aversion
LOSS aversion
mental accounting
MENTAL accounting
present bias
PRESENT bias
anchoring
ANC-hor-ing
heuristic
HEU-ris-tic
overconfidence
OVER-conf-idence
Read & Discuss
Short Dialogue
A:
I've been thinking a lot about loss aversion recently.
B:
Really? What's your take on it?
A:
I think the issue of mental accounting is often misunderstood.
B:
I agree. Most people don't consider the impact of present bias.
A:
Exactly. And when you add anchoring into the mix, it gets complicated.
B:
So what do you think the solution is?
A:
Honestly? It requires both individual action and systemic change.
B:
That's a fair point. It's never just one or the other.
Comprehension
What topic are they discussing?
What does person B agree with?
What does person A say the solution requires?
Practice
Exercises
Gap Fill
Complete each sentence using vocabulary from today's lesson.
1. explains why people hold losing investments too long.
2. leads people to spend a bonus differently from earned income.
3. underlies most failures of personal financial planning.
4. The concept of is important in this context.
5. Cognitive s are useful in everyday life but dangerous in financial markets.
Error Correction
Find and correct the mistake in each sentence.
The loss aversion of data has raise serious concerns.
Despite of the challenges, they succeeded.
The report, that was published last year, is relevant.
She suggested to review the anchoring more carefully.
Speaking practice
Speaking Prompts
Discuss with your partner
Can you identify a financial decision you have made that was influenced by one of today's biases?
Does understanding loss aversion change how you would manage a team through a failing project?
Is it possible to be rational about money? Or are all financial decisions ultimately emotional?
Summarise today's topic in 3 sentences using vocabulary from this lesson.
Grammar focus: Concessive and contrastive structures for behavioural economics: While standard ... — can you give an example?
Open discussion
Discussion Generator
More Questions
Use with pairs or whole class · Encourage full answers
Write a financial advice article (10-12 sentences) aimed at someone making their first investment decisions. Explain three cognitive biases they should be aware of and how to counteract each.
