Mental accounting

Mental accounting is a psychological effect whereby we divide money into invisible "accounts" and treat it differently – even though money is always the same.

Examples:

• You stick rigidly to saving €200/month, but at the same time spend a €1,000 tax refund on clothes – as if it were "bonus money"
• You take out an expensive loan even though you'd have enough money in your instant-access savings account
• Gift money is spent more freely than money you earned yourself

Use the effect positively: actually set up separate accounts (emergency fund, holiday, investing). The "three-account model" turns mental accounting into a strength instead of a weakness.