Ignoring risk happens a lot, as part of a kind of binary thinking. Consumers often think risks are 'normal' or 'high' and rarely acknowledge much in between. That's one of the ways you get people stepping out into traffic from out of sight between two parked cars, when only twenty metres away there is a pedestrian crossing. We probably all know people who eat only organic vegetables, and yet love bacon, crispy bits and all.
Small risks taken many, many, times over are especially tricky. Some people appear to be operating on the basis that they will quit smoking just before they expect to get lung cancer.
Talking about risks should be a part of life: which we take, which we avoid, and which we need to manage in other ways.
Financial advisers can help people have more sophisticated discussions about risk. That skill, learned by talking about income protection, perhaps, can be useful when talking to your kids about when they should be home, too. The risk management lessons which can stretch are something like:
- Risk is real, and variable – what is the risk
- Small risks should not stand in the way of a good decision – otherwise you might stay in bed
- Risks can be managed – let's look at how we could in this case
- Financial risk transfer can make small risks easier to take – opening up a bigger life
By Russell Hutchinson