Mental accounting theory confirmed in international study

An international study involving 5,589 participants across 21 countries has confirmed the theory of ‘mental accounting,’ which describes how individuals psychologically categorize and value money differently based on its source and context.

Research published in the Journal of Consumer Research indicates that financial decisions are often not purely rational. For instance, the same amount of money, such as $100, may be treated differently if earned through overtime pay versus receiving it as a tax refund. The former is often viewed as standard income for routine expenses, while the latter is frequently perceived as a bonus more easily spent on non-essential items.

The study also found that the perceived value of savings can fluctuate based on the total price of a product; saving $5 feels more significant when purchasing a $10 item than when buying a $100 item. Additionally, the effects of mental accounting appear to be weaker in lower-income countries compared to wealthier nations.