Mental Accounting
Mental accounting is treating money differently based on its source or intended use, violating the principle that money is fungible (interchangeable).
Get personalized explanations
💡
Exam Tip
Mental accounting violates fungibility. Richard Thaler Nobel Prize. Example: savings at 2% while 20% credit card debt.
What is Mental Accounting?
Richard Thaler's Nobel Prize concept - we categorize money into mental "buckets."
Examples
- Spending bonus "freely" while carrying debt
- Keeping savings earning 2% with 20% credit card debt
- Treating "found money" differently
Positive Uses
- Forced savings (retirement "untouchable")
- Budget categories
- Goal-based investing