In Mark Twain’s novel, The Adventures of Tom Sawyer, Tom’s Aunt Polly makes him paint her garden fence one Saturday morning as punishment. Every child in the neighbourhood is out playing except Tom. When a boy called Ben passes by, Tom pretends that fence painting is a “privilege” that few people have. He

convinces Ben not only to lend him a hand but also to pay him for the honour of painting Aunt Polly’s fence. Shortly after, more children wanted to join in, and Tom also charged them

The Tom Sawyer effect is a form of financial bias that affects how you manage your money. It follows that a recommendation, opinion, or how someone f

eeds you information can cloud what you think something is worth, manipulating your expectations beyond objectivity

Researchers at the Federal Reserve Bank of Boston conducted experiments to show how the Tom Sawyer effect changes people’s perception of value and consumption. In one experiment, a professor told his students he would recite poetry for 15 minutes. First, he split the class into two groups. Then, he told each student in the first group to pay two dollars if they listened to his recital; the second group, he said, would receive two dollars for that same reason. Only 3% of the first group were willing to pay, while 59% of the second group accepted payment

The professor then said he would read to both groups for free. 35% of the first group were happy to listen, but only 8% of the second group, a significant fall from the 59%, were ready to take payment. So? The initial request for students to pay or receive money determined how they perceived the recital’s value

The Tom Sawyer effect on your personal finances

Being informed is critical to managing your expectations. The same goes for managing your finances. You might have bought something or signed up for a service because someone else did or recommended it. Even if you haven’t tried a product or service before, you give it a specific value you are willing to pay. You could end up spending (too much) money on something you don’t need

Investment and other components of your finances are also susceptible to the Tom Sawyer effect. You might want to invest in the stock market if you know someone who’s made money from it or because of favourable market outlooks. Either way, you would be basing your expectations on the information that you receive

How to avoid the Tom Sawyer effect

• When it comes to financial bias, your emotions directly impact your behaviour. Recognising that psychological, social and cognitive factors have a bearing on your financial decision-making is the first step to pinpointing them
• You should double-check the information you receive about products, services and investments before you spend your money. Knowing how much money you can borrow, what disposable income you have, and understanding your expectations can help you make better decisions
• Some simple but effective techniques can help combat the Tom Sawyer effect. For instance, drawing up a budget to keep tabs on your income and expenses, making shopping lists to stop impulse buying, and taking the time to weigh up the good and the bad of your financial decisions

You should always do whatever it takes to keep your finances in check. Distinguishing between fact and opinion will benefit your financial health by helping you recognise when you’re biting off more than you can chew. That way, you won’t fall victim to daylight robbery because of information you have received or expectations you have built, just like the children swindled by Tom Sawyer in Mark Twain’s novel