Would Financial Warning Labels Help?

by Michael on Jan 6, 2014

Image of a Warning Sign

Have you ever been to a restaurant where the menus are labeled with the calorie contents of each dish?

They don’t label menus around here, but I often see it when I travel. And, though such labels may have little effect on the average diner, seeing those numbers always makes me think twice when ordering.

This got me to thinking. What if we started attaching financial warning labels to consumer products? Would it have any effect on spending behavior?

Of course, I’m not really suggesting that we start doing this, but I can’t help but wonder… Would people be better with money if they had a better sense of the true cost of their spending decisions?

Perhaps they’d look at that $100/month cable plan a little differently if they knew that it would cost them $20k (all things considered) over the next decade. And maybe that new shiny new $500 iPad would look a little less shiny if they knew they’d be foregoing $5k in retirement by reaching for their wallet.

Or maybe it wouldn’t matter at all. Perhaps the average Joe on the street is too driven by a desire for instant gratification for any of this to make a difference.

Consider, for example, that credit card statements already include such warnings and yet many people still mismanage them. See, for example, the following snippet from one of our recent Barclaycard Arrival statements.

Our balance that month was $1,430. But, if we opted to just make the minimum payments, the total cost would be $2,358 over the next nine years. If that’s not enough to get you to pay your bills in full, I’m not sure what is.

Note: As an aside, the Arrival card is still offering a signup bonus of 40k points worth up to $444 cash plus up to 2.2% cash back on all purchases. Please just be sure not to carry a balance from one month to the next. 🙂

Returning for the moment to the issue of menu labeling, perhaps it would work better if we took a longer term view. What if that 200 calorie daily donut on the way to work was translated into an annual value?

Would knowing that you’re consuming an extra 50,000 calories (that’s enough to gain/lose over 14 pounds of fat!) per year make a difference? Or would people still ignore that just like they ignore credit card warnings?

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