From Defaults to Reminders: How Behavioural Nudges May Help Your Financial Decisions

Imagine walking into a supermarket to buy snacks. Among dozens of brands, one box stands out—it’s placed right at eye level, while others are stacked on the lower or higher shelves. Many shoppers reach for the convenient option in front of them, not necessarily the one they intended to buy.

This is a nudge: a subtle adjustment in how choices are presented that may steer behaviour in predictable ways, without removing the freedom to choose differently.

In recent years, nudges have gained attention in fields ranging from public policy to personal finance. To understand why nudges matter in money management, it helps to turn to behavioural finance—the study of how psychological tendencies and emotions might influence financial decisions and market outcomes.

Research in this area highlights that people do not always behave rationally, even when it comes to finances; biases such as loss aversion, inertia, and framing effects can result in emotional and sometimes, suboptimal decisions.

Table of contents

• How nudges can counter common decision traps
• Principles for responsible nudging

How nudges can counter common decision traps

Here are some examples of types of nudges and how they may influence decisions.

1. Automatic enrolment: One of the most common barriers in personal finance is simple inertia. Many people intend to save more or invest regularly, but they delay taking the first step. Evidence from workplace retirement plans shows that automatic enrolment—where individuals are signed up by default unless they opt out—can raise participation rates. Defaults may not be suitable for everyone, and should be reviewed over time, but they may help overcome the procrastination that often hinders savings.
2. Save more tomorrow: Instead of asking workers to contribute more today, they commit in advance to allocating part of their future increments to savings or investments. Since the adjustment happens later and alongside a raise, the change may feel less painful. This approach could help people sidestep present bias, where short-term comfort outweighs long-term benefit.
3. Default options: Choice overload is another behavioural challenge. When confronted with too many funds or investment strategies, some individuals might avoid making any choice at all or stick with a default option. Studies suggest that streamlined menus and clearer categories may reduce paralysis and encourage more thoughtful selections. That said, the right number of options is not the same for everyone, so flexibility remains key.
4. Reminders: Timely reminders can also act as helpful nudges. People who intend to invest regularly may forget when life gets busy. Experiments show that well-designed reminders—such as text messages or app notifications around payday—may increase savings contributions by bringing financial goals top of mind.
5. Narrative: Finally, the framing of information can shape perceptions of risk and reward. According to prospect theory, people tend to dislike losses more than they appreciate equivalent gains. If investment outcomes are presented only in terms of losses, individuals may become overly cautious. Balanced framing that shows both upside and downside scenarios could encourage more measured decisions.

Read Also: Behavioral Finance: Meaning, Types, and Its Importance

Principles for responsible nudging

While nudges can make it easier for people to act on positive financial intentions, they also carry responsibility. A poorly designed nudge might unintentionally lock someone into an unsuitable option, create overconfidence, or overlook diverse needs. Because financial choices affect people’s long-term security, nudges should be used with care, transparency, and respect for individual autonomy.

Here are some guiding principles:

• Preserve choice. Nudges should make one path easier without blocking alternatives. Defaults, for instance, should be easy to change.
• Simplify responsibly. Streamlining options and disclosures can reduce friction, but must not overpromise or imply certainty.
• Test and refine. Nudges that work well in one context may not translate directly elsewhere. Ongoing evaluation can help ensure they remain effective and appropriate.
• Combine with education. Nudges may help people take the first step, while balanced information and guidance can support longer-term confidence.

Read Also: Impact of Behavioural Finance on Market Conditions

Conclusion

Nudges show how small, thoughtfully-designed cues might help people follow through on their financial intentions—saving a little more, investing consistently, or sticking with a chosen plan. They are not guarantees and should be applied with transparency, care, and respect for individual choice. Used responsibly, nudges may serve as quiet but effective allies in making financial decisions easier to execute.

At Bajaj Finserv AMC, we recognise that emotions are the cornerstone of investor behaviour – not just for investors but for investment professionals too. That’s why, behavioural finance is at the heart of our investment philosophy, InQuBe, which combines the Information Edge, Quantitative Edge and Behavioural Edge. By understanding, tracking and monitoring market sentiments and our own investment biases, we seek to make mindful and strategic investment decisions. Get the Behavioural edge by investing with Bajaj Finserv AMC. Read more about InQuBe here.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

This document should not be treated as endorsement of the views/opinions or as investment advice. This document should not be construed as a research report or a recommendation to buy or sell any security. This document is for information purpose only and should not be construed as a promise on minimum returns or safeguard of capital. This document alone is not sufficient and should not be used for the development or implementation of an investment strategy. The recipient should note and understand that the information provided above may not contain all the material aspects relevant for making an investment decision. Investors are advised to consult their own investment advisor before making any investment decision in light of their risk appetite, investment goals and horizon. This information is subject to change without any prior notice.

The content herein has been prepared on the basis of publicly available information believed to be reliable. However, Bajaj Finserv Asset Management Ltd. does not guarantee the accuracy of such information, assure its completeness or warrant such information will not be changed. The tax information (if any) in this article is based on current laws and is subject to change. Please consult a tax professional or refer to the latest regulations for up-to-date information.