Introduction to Money Illusion Money illusion is one of many cognitive errors that influence our financial behavior. This mistake is that we often judge the value of money and its purchasing power solely by its face value, ignoring inflation and the real cost of living. This can lead to poor financial decisions and loss of money. Examples of Money Illusion1. The face value effect One of the most striking examples of money illusion is the face value effect. People may consider a larger amount of money to be more valuable in face value than a smaller amount, even if their purchasing power is the same. For example, imagine that you have a choice between receiving 1,000 dollars or 1,000 units of some other currency, say yen. Even though both amounts are equivalent, many would prefer $1,000 simply because it sounds like a large amount.2. The Impact of Inflation Another common example of money illusion involves inflation. People may underestimate the impact of inflation on the purchasing power of money. For example, if a bank deposit offers 2% interest per annum and inflation is 3%, then our money is actually decreasing its purchasing power. But many people may see 2% as a positive amount and think they are making money, ignoring the losses from inflation.3. Focus on Short-Term GainsMoney illusion can also influence our financial decisions, causing us to focus on short-term gains at the expense of long-term goals. For example, if you have the opportunity to get a small amount of money right now, you may be inclined to take this option without considering the long-term financial consequences. How to Avoid the Money Illusion Avoiding the money illusion requires recognizing this mistake and taking steps to overcome it. Here are some tips: Education: Understanding financial concepts such as inflation, purchasing power, and the real value of money will help you evaluate your financial decisions more accurately. Long-term planning: Focus on long-term financial goals and factor them into your decisions. This will help you avoid the temptation to give in to short-term illusions. Financial Literacy: Learn financial literacy and master financial management skills. The more informed you become, the less likely you are to fall into the trap of money illusion. Money illusion in the work of a psychologist In the work of a psychologist, it is important to understand how our thinking and perception can be influenced by various cognitive errors. One of these mistakes is money illusion - a mental perception that makes us think about money regardless of circumstances and context. In this article, we will look at how money illusion can affect psychological practice and how psychologists can avoid such mistakes. Money illusion is the tendency of people to think of money as a value in itself, while ignoring other important factors. It can manifest itself in different situations, and psychological practice is no exception. One example of money illusion in the work of a psychologist can be their assessment of the cost of services. Psychologists often perceive their services through the lens of monetary value, which can distort the quality of care provided. For example, a psychologist may be inclined to continue therapy for a long time in order to get more money from a client, even if this is necessary and the client has already made significant progress. This approach is based on a money illusion, where money becomes the main indicator of success in work. Another example of a money illusion could be a psychologist’s orientation towards more “expensive” or prestigious methods and techniques, even if they do not provide better results. A psychologist may choose such methods to increase the cost of his services and attract more affluent clients. This can lead to undesirable consequences, such as insufficient attention to the individual needs of the client or the use of ineffective.