{"id":8203,"date":"2019-07-22T10:41:23","date_gmt":"2019-07-22T14:41:23","guid":{"rendered":"https:\/\/www.afcpe.org\/?p=8203"},"modified":"2019-07-22T10:48:25","modified_gmt":"2019-07-22T14:48:25","slug":"mental-accounting","status":"publish","type":"post","link":"https:\/\/www.afcpe.org\/news-and-publications\/blog\/mental-accounting\/","title":{"rendered":"Using Mental Accounting to Motivate Savings"},"content":{"rendered":"\t\t
\n\t\t\t\t\t\t
\n\t\t\t\t\t\t
\n\t\t\t\t\t
\n\t\t\t
\n\t\t\t\t\t\t
\n\t\t\t\t
\n\t\t\t\t\t\t\t\t\t

\u00a0<\/p>

I am fascinated by the field of behavioral economics, which is a good thing since my job at Military Saves<\/a> revolves around motivating service members to save. Recently, while researching something else entirely, I came across an interesting chapter<\/a> on mental accounting — \u201cAddition by Division: Partitioning Real Accounts for Financial Well-Being\u201d — that I think not only sheds some light on why saving can be such a struggle, but also offers some concrete steps that we can take to improve saving success.<\/p>

According to the authors of this piece, a group of marketing and behavioral economics professors, mental accounting is how \u201cconsumers rationalize expenditures and enhance self-control.\u201d The term derives from real-world accounting and, simply put, is how our brains organize how we spend money. Just as financial institutions divide up our accounts into subaccounts like savings and checking, so too do our minds.<\/p>

Knowing that our brains work this way can have real world implications for personal finance. For example, having earmarked accounts \u2013 both in our minds and IRL (In Real Life) can be extremely beneficial.<\/p>

Earmarking Your Territory<\/strong><\/p>

Earmarked accounts can combine something very old school \u2013 the \u201cclub account\u201d concept \u2013 with something very new school \u2013 online banks with low or no fees that allow for multiple subaccounts. Since, according to the authors, consumers generally find immediate use of money (spending in the here and now) more compelling and concrete than putting away money for later, a named, specific account can be a powerful tool to stimulate saving.<\/p>

It is much more exciting to save for \u201cMy Cruise\u201d or \u201cGabi\u2019s Education\u201d than in a traditional, unnamed savings account. When everything goes into one pot, it is also very tempting to use that money for other purposes.<\/p>

There are several apps out there, both free and pay, that now do this for consumers \u2013 saving small amounts here and there and dumping them into earmarked accounts.<\/p>

Fighting the Pain of Paying<\/strong><\/p>

One benefit of having separate accounts is that it allows a measure of security for those tightwads who feel the pain of spending. I have an account, funded by a small monthly deposit, that is literally named \u201cLila\u2019s Discretionary.\u201d It gives me the freedom and peace of mind to buy \u201cwants\u201d like a cappuccino or a magazine.<\/p>

Out With the Old, In With the New<\/strong><\/p>

One of the most interesting points that the authors of this chapter make is that the more consumers save, the more they can experience diminishing motivation to save. For example, it is much less satisfying to contribute $5,000 to an account that has $100,000 in it than it is to contribute the same amount to an account with just a few hundred dollars in it.<\/p>

The suggestion is to have \u201cold money\u201d and \u201cnew money\u201d accounts, establishing a new account every few years or when reaching a certain dollar amount.<\/p>

Conclusion<\/strong><\/p>

While behavioral economics is not some sort of magic formula that can cure the current savings crisis, it is definitely a tool in the financial counselor\u2019s arsenal. I find that it not only helps explain why savers behave the way they do, but it also provokes deeper thinking about possible solutions.<\/p>

What are some behavioral finance tricks you\u2019ve found useful with clients or in you own life?<\/strong><\/p>

Guest Contributor:\u00a0<\/em><\/strong>Lila Quintiliani, AFC\u00ae, Military Saves Program Manager<\/em><\/p>

America Saves invites you to join their partners and stakeholders to discuss and strategize how to attack the nationwide savings crisis and make a tangible impact in the financial health of everyday Americans. Your voice is critical!<\/p>

\"\"<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t

\n\t\t\t
\n\t\t\t\t\t\t
\n\t\t\t\t
\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\"\"\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"

\u00a0 I am fascinated by the field of behavioral economics, which is a good thing since my job at Military Saves revolves around motivating service members to save. Recently, while researching something else entirely, I came across an interesting chapter on mental accounting — \u201cAddition by Division: Partitioning Real Accounts for Financial Well-Being\u201d — that I think not only sheds […]<\/p>\n","protected":false},"author":4,"featured_media":8204,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_cbd_carousel_blocks":"[]","_relevanssi_hide_post":"","_relevanssi_hide_content":"","_relevanssi_pin_for_all":"","_relevanssi_pin_keywords":"","_relevanssi_unpin_keywords":"","_relevanssi_related_keywords":"","_relevanssi_related_include_ids":"","_relevanssi_related_exclude_ids":"","_relevanssi_related_no_append":"","_relevanssi_related_not_related":"","_relevanssi_related_posts":"","_relevanssi_noindex_reason":"","footnotes":""},"categories":[38],"tags":[],"class_list":["post-8203","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-saving"],"acf":[],"yoast_head":"\nUsing Mental Accounting to Motivate Savings - AFCPE<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.afcpe.org\/news-and-publications\/blog\/mental-accounting\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Using Mental Accounting to Motivate Savings - AFCPE\" \/>\n<meta property=\"og:description\" content=\"\u00a0 I am fascinated by the field of behavioral economics, which is a good thing since my job at Military Saves revolves around motivating service members to save. Recently, while researching something else entirely, I came across an interesting chapter on mental accounting — \u201cAddition by Division: Partitioning Real Accounts for Financial Well-Being\u201d — that I think not only sheds […]\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.afcpe.org\/news-and-publications\/blog\/mental-accounting\/\" \/>\n<meta property=\"og:site_name\" content=\"AFCPE\" \/>\n<meta property=\"article:published_time\" content=\"2019-07-22T14:41:23+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2019-07-22T14:48:25+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.afcpe.org\/wp-content\/uploads\/2019\/07\/saving.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"640\" \/>\n\t<meta property=\"og:image:height\" content=\"427\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Rachael Deleon\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Rachael Deleon\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.afcpe.org\/news-and-publications\/blog\/mental-accounting\/\",\"url\":\"https:\/\/www.afcpe.org\/news-and-publications\/blog\/mental-accounting\/\",\"name\":\"Using Mental Accounting to Motivate Savings - AFCPE\",\"isPartOf\":{\"@id\":\"https:\/\/www.afcpe.org\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/www.afcpe.org\/news-and-publications\/blog\/mental-accounting\/#primaryimage\"},\"image\":{\"@id\":\"https:\/\/www.afcpe.org\/news-and-publications\/blog\/mental-accounting\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/www.afcpe.org\/wp-content\/uploads\/2019\/07\/saving.jpg\",\"datePublished\":\"2019-07-22T14:41:23+00:00\",\"dateModified\":\"2019-07-22T14:48:25+00:00\",\"author\":{\"@id\":\"https:\/\/www.afcpe.org\/#\/schema\/person\/ccae601ec179bf73fabbf4b3c6f688f8\"},\"breadcrumb\":{\"@id\":\"https:\/\/www.afcpe.org\/news-and-publications\/blog\/mental-accounting\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.afcpe.org\/news-and-publications\/blog\/mental-accounting\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.afcpe.org\/news-and-publications\/blog\/mental-accounting\/#primaryimage\",\"url\":\"https:\/\/www.afcpe.org\/wp-content\/uploads\/2019\/07\/saving.jpg\",\"contentUrl\":\"https:\/\/www.afcpe.org\/wp-content\/uploads\/2019\/07\/saving.jpg\",\"width\":640,\"height\":427},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/www.afcpe.org\/news-and-publications\/blog\/mental-accounting\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/www.afcpe.org\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Using Mental Accounting to Motivate Savings\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.afcpe.org\/#website\",\"url\":\"https:\/\/www.afcpe.org\/\",\"name\":\"AFCPE\",\"description\":\"Association for Financial Counseling & Planning Education\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.afcpe.org\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Person\",\"@id\":\"https:\/\/www.afcpe.org\/#\/schema\/person\/ccae601ec179bf73fabbf4b3c6f688f8\",\"name\":\"Rachael Deleon\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.afcpe.org\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/secure.gravatar.com\/avatar\/ab24a29c7aadc1652d9f81f409950cf6cba10ad20c158ceaad83e8b44bbf2b4a?s=96&d=mm&r=g\",\"contentUrl\":\"https:\/\/secure.gravatar.com\/avatar\/ab24a29c7aadc1652d9f81f409950cf6cba10ad20c158ceaad83e8b44bbf2b4a?s=96&d=mm&r=g\",\"caption\":\"Rachael Deleon\"},\"url\":\"https:\/\/www.afcpe.org\/news-and-publications\/blog\/author\/rachael\/\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Using Mental Accounting to Motivate Savings - AFCPE","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.afcpe.org\/news-and-publications\/blog\/mental-accounting\/","og_locale":"en_US","og_type":"article","og_title":"Using Mental Accounting to Motivate Savings - AFCPE","og_description":"\u00a0 I am fascinated by the field of behavioral economics, which is a good thing since my job at Military Saves revolves around motivating service members to save. Recently, while researching something else entirely, I came across an interesting chapter on mental accounting — \u201cAddition by Division: Partitioning Real Accounts for Financial Well-Being\u201d — that I think not only sheds […]","og_url":"https:\/\/www.afcpe.org\/news-and-publications\/blog\/mental-accounting\/","og_site_name":"AFCPE","article_published_time":"2019-07-22T14:41:23+00:00","article_modified_time":"2019-07-22T14:48:25+00:00","og_image":[{"width":640,"height":427,"url":"https:\/\/www.afcpe.org\/wp-content\/uploads\/2019\/07\/saving.jpg","type":"image\/jpeg"}],"author":"Rachael Deleon","twitter_card":"summary_large_image","twitter_misc":{"Written by":"Rachael Deleon","Est. reading time":"3 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/www.afcpe.org\/news-and-publications\/blog\/mental-accounting\/","url":"https:\/\/www.afcpe.org\/news-and-publications\/blog\/mental-accounting\/","name":"Using Mental Accounting to Motivate Savings - AFCPE","isPartOf":{"@id":"https:\/\/www.afcpe.org\/#website"},"primaryImageOfPage":{"@id":"https:\/\/www.afcpe.org\/news-and-publications\/blog\/mental-accounting\/#primaryimage"},"image":{"@id":"https:\/\/www.afcpe.org\/news-and-publications\/blog\/mental-accounting\/#primaryimage"},"thumbnailUrl":"https:\/\/www.afcpe.org\/wp-content\/uploads\/2019\/07\/saving.jpg","datePublished":"2019-07-22T14:41:23+00:00","dateModified":"2019-07-22T14:48:25+00:00","author":{"@id":"https:\/\/www.afcpe.org\/#\/schema\/person\/ccae601ec179bf73fabbf4b3c6f688f8"},"breadcrumb":{"@id":"https:\/\/www.afcpe.org\/news-and-publications\/blog\/mental-accounting\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.afcpe.org\/news-and-publications\/blog\/mental-accounting\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.afcpe.org\/news-and-publications\/blog\/mental-accounting\/#primaryimage","url":"https:\/\/www.afcpe.org\/wp-content\/uploads\/2019\/07\/saving.jpg","contentUrl":"https:\/\/www.afcpe.org\/wp-content\/uploads\/2019\/07\/saving.jpg","width":640,"height":427},{"@type":"BreadcrumbList","@id":"https:\/\/www.afcpe.org\/news-and-publications\/blog\/mental-accounting\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/www.afcpe.org\/"},{"@type":"ListItem","position":2,"name":"Using Mental Accounting to Motivate Savings"}]},{"@type":"WebSite","@id":"https:\/\/www.afcpe.org\/#website","url":"https:\/\/www.afcpe.org\/","name":"AFCPE","description":"Association for Financial Counseling & Planning Education","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.afcpe.org\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Person","@id":"https:\/\/www.afcpe.org\/#\/schema\/person\/ccae601ec179bf73fabbf4b3c6f688f8","name":"Rachael Deleon","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.afcpe.org\/#\/schema\/person\/image\/","url":"https:\/\/secure.gravatar.com\/avatar\/ab24a29c7aadc1652d9f81f409950cf6cba10ad20c158ceaad83e8b44bbf2b4a?s=96&d=mm&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/ab24a29c7aadc1652d9f81f409950cf6cba10ad20c158ceaad83e8b44bbf2b4a?s=96&d=mm&r=g","caption":"Rachael Deleon"},"url":"https:\/\/www.afcpe.org\/news-and-publications\/blog\/author\/rachael\/"}]}},"_links":{"self":[{"href":"https:\/\/www.afcpe.org\/wp-json\/wp\/v2\/posts\/8203","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.afcpe.org\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.afcpe.org\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.afcpe.org\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.afcpe.org\/wp-json\/wp\/v2\/comments?post=8203"}],"version-history":[{"count":0,"href":"https:\/\/www.afcpe.org\/wp-json\/wp\/v2\/posts\/8203\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.afcpe.org\/wp-json\/wp\/v2\/media\/8204"}],"wp:attachment":[{"href":"https:\/\/www.afcpe.org\/wp-json\/wp\/v2\/media?parent=8203"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.afcpe.org\/wp-json\/wp\/v2\/categories?post=8203"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.afcpe.org\/wp-json\/wp\/v2\/tags?post=8203"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}