When it comes to financial scams, whether it’s Charles Ponzi’s epic pyramid scheme to low-level criminals conning the elderly out of their pensions, it pays to be vigilant. After all, at a time when our household budgets are being squeezed and our wages are stubbornly refusing to grow in the face of rising inflation, we need to protect our money even more than ever before.
Even the smartest consumers can fall for a con-artist’s lies. Their scams sound so real, and besides, we want to believe we can become richer. So, when it already feels like our finances are struggling, it’s worth understanding a few of the psychological tricks con-artists will use to get you to part with your money.
They gain trust
When it comes to our money, most of us want to feel like we’re in safe hands. Think of the bank manager in his trim suit; the cashier who artfully counts out our money with a practiced and admirable speed.
There are a number of ways that criminals can convince us that they’re the real deal, beyond a good suit and tie and impeccably professional manner. One simple trick is to use an iPad or clipboard, which instantly conveys an artificial air of seriousness. Why else, we reason, would they be carrying one of those?
Another scam criminals use is to reference recent, real-life news stories as the basis of their lie. For instance, if the BBC announced that pensions were being slashed, we’re much more likely to think we need to investigate our financial options. They’ll sound knowledgeable, too, and will have done just enough research to convince us that they’re genuine.
They set time limits
We’re suckers for a bargain, and criminals employ the same methods here as retail giants do when they’re having a sale: They make it known that it’s available for a limited time only. Yes, if you act within an arbitrary time limit, then you could stand to gain so much more than your initial investment (cash, preferably).
Time limits create a sense of urgency – we feel must act. It forces us to focus on the scam’s benefits, while preventing us from thinking about it quite so critically. But it also triggers a part of our brain that fears missing out on the reward. We figure we’ll kick ourselves if we don’t sign up today, and besides, can we really afford to miss out? And when we’re talking about supposedly genuine financial improvement, that fear of missing out becomes almost intolerable.
They offer ‘too good to be true’ deals
Without a deal ‘too good to be true’, most financial scams just wouldn’t work. That’s their foundation – a small investment now; a massive reward later. It fires up our risk-reward responses, becoming positively irresistible.
But con-artists are as cunning as they are fool-hardy. So, they know that to get everyday people to part with their cash, it’s no good offering unsustainable and highly suspicious promises. Instead, they’ll moderate their offers, to be just the right side of ‘too good to be true.’ They won’t promise future millions because savvier consumers will know that’s just not likely. But £100,000 for a £10,000 investment sounds a lot more reasonable.
They bamboozle with numbers
This psychological trick serves two distinct purposes. In part, it increases their apparent level of trust. They can spit out fact and figures at the rapid-fire rate that make them sound incredibly knowledgeable – they walk the walk; talk the talk. And usually, those figures are large, designed to scare us into submission.
But there are two ulterior motives here. For one thing, it’s a power-play. By bamboozling us with numbers, the criminal gains the upper-hand, leaving us on the back-foot.
Secondly, all those numbers, acronyms, percentage figures, thrown out constantly and seemingly at random induce a sort of comatose mind-set, which acts to dull our critical faculties. Think about students in a maths class, utterly unengaged or confused, it’s the same thing. And in that state, we become that much more malleable to parting with our money.
