Understanding Cognitive Biases: Part 1
Unit 1 · Lesson 1.6 · Last updated October 13, 2026
A 45-minute lesson in which students take a short questionnaire to experience four cognitive biases firsthand: present bias, overconfidence bias, the anchoring effect and loss aversion. They then connect each bias to real-world personal finance decisions.
Overview
In this lesson, students complete a short questionnaire to experience four cognitive biases, which are present bias, overconfidence bias, loss aversion, and the anchoring effect. During the debrief, the class defines each bias and looks at how it can affect a personal finance decision. Students are briefly introduced to strategies for avoiding these biases, a topic they will return to in Lesson 1.7.
Learning Objectives
- Explain how cognitive biases influence financial decision making.
- Identify examples of cognitive biases in real-world scenarios.
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Materials
- Instruction Slides (display during class period)
- Student Handout (1 copy per student). Includes the questionnaire used throughout the lesson.
Paper Option
- Goal Matching Cards (class set, 1 copy cut into 8 cards per pair of students). Consider printing on cardstock for longevity.
Electronic Option
- Digital Matching Cards (make a copy and enable editing access for each pair of students)
- Laptop or tablet (1 per pair of students)
Lesson Sequence
Slides 2–8
- Display Slide 2. Distribute 1 copy of the Goal Matching Cards to each pair of students and direct them to match each of the four people to the goal that is most relevant to their stated values and circumstances. Allow approximately 2 minutes. Note: refer to the notes section of the slides to support discussion as needed. Digital option: substitute the Digital Matching Cards for the physical cards here.
- Advance to Slide 3 and reveal the correct matches. Clarify misconceptions as a class, then collect the Goal Matching Cards.
- Proceed to Slide 4. Explain the importance of relevancy when setting a goal.
- Display Slide 5. Acknowledge that the goal-matching activity focused only on relevance, which is one of the five characteristics of an effective goal.
- Progress through Slides 6–7. Use the text on the slides to remind students what has been covered in the unit and what will be addressed in future lessons.
- Proceed to Slide 8. Explain the learning objectives for students.
Slides 9–13
- Advance through Slides 9–10. Emphasize the number of decisions that the average adult makes in a day.
- Progress through Slides 11–12. Use the text on the slides to acknowledge that because of the quantity of decisions made, nobody can methodically apply the principles of economic thinking to every decision, and as a result human brains take shortcuts to make most of them.
- Proceed to Slide 13. Explain that when making consequential financial decisions, it is beneficial to slow down and apply the principles of economic thinking instead of allowing the brain to take a shortcut.
Slides 14–39
- Progress through Slides 14–15. Distribute 1 copy of the Student Handout to each student and emphasize that the questionnaire is a no-stakes activity. Allow students 3 to 4 minutes to complete it individually.
- Click to reveal the remaining text on Slide 15 and tell students that the class will review all of the questions, starting with Question 2.
- Advance to Slide 16. Poll the class to determine how many students have procrastinated.
- Display Slide 17. Present the research on the prevalence of procrastination, then click to reveal the pink text box.
- Progress through Slides 18–19 to define present bias and identify how it connects to personal finance, using saving for retirement as an example. Encourage students to add notes to their handout throughout the lesson.
- Proceed to Slide 20. Explain how present bias influences decision making and its connection to procrastination.
- Display Slide 21. Present the analogy that present bias is like a pop-up in your brain.
- Advance through Slides 22–23. Poll the class to determine how students rated their ability to multitask, then share the research on how individuals perceive that ability.
- Progress through Slides 24–26. Define overconfidence bias and identify how it connects to personal finance, using stock picking as an example.
- Display Slide 27. Tell students to discuss the prompt and record their response on their handout, then call on several students to share with the class.
- Proceed through Slides 28–29. Poll the class to determine which subscription plans students chose and define the anchoring effect.
- Advance to Slide 30. Allow students 30 seconds to discuss the question with a peer, then call on a volunteer to share. Supplement student responses by explicitly connecting Question 4 to the anchoring effect. Suggested responses are in the notes section of the Instruction Slides.
- Proceed to Slide 31. Use the examples on the slide to explain how the anchoring effect relates to personal finance, using advertising as an example.
- Advance through Slides 32–33. Poll the class to determine how students responded to Questions 1 and 5.
- Progress through Slides 34–35. Define loss aversion and play the 20-second video clip to identify how it connects to personal finance, using insurance advertisements as an example.
- Display Slide 36. Tell students to discuss the prompt and record their response on their handout, then call on several students to share with the class.
- Proceed to Slide 37. Allow students a moment to read the text and discuss the prompt with a partner, then call on several pairs to share.
- Advance to Slide 38. Define cognitive bias and connect cognitive biases to pop-ups in your brain.
- Display Slide 39. Click to explain some of the ways students can avoid these cognitive biases and encourage students to add notes to their handouts. Note: students will get more information about these and other brain hacks in Lesson 1.7.
Slides 40–41
- Progress through Slides 40–41. Tell students to consider the prompt on Slide 41, then call on several students to share their thoughts with the class.
Aligned Standards
National Standards for Personal Financial Education
Standard IV Investing
Voluntary National Content Standards in Economics
Standard 2 Decision-Making
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