What Is Mentale buchfuehrung?
Mentale buchfuehrung, or mental accounting, is a concept within behavioral finance that describes the cognitive tendency of individuals to categorize and treat money differently based on its source or intended use, rather than perceiving all money as interchangeable or "fungible." This means that people may assign subjective values and rules to different sums of money, leading to decision-making that deviates from traditional economic rationality. For instance, money received as a bonus might be mentally earmarked for discretionary spending, while an equivalent amount from a regular paycheck is allocated to necessities. This internal classification system, influenced by cognitive biases and heuristics, can significantly impact financial behaviors like saving, spending, and investing.
History and Origin
The concept of mentale buchfuehrung was primarily developed by American economist Richard H. Thaler, who was awarded the Nobel Memorial Prize in Economic Sciences in 2017 for his contributions to behavioral economics. Thaler introduced and elaborated on mental accounting in a series of influential papers, including "Mental Accounting and Consumer Choice" (1985) and "Mental Accounting Matters" (1999).47, 48, 49 His work built upon the foundational insights of psychologists Daniel Kahneman and Amos Tversky, particularly their prospect theory, which explores how individuals evaluate gains and losses.44, 45, 46 Thaler observed that, contrary to conventional economic theory which posits that money is fully fungible, individuals often create "mental accounts" for different sources and uses of funds. This psychological approach to how people manage their finances provided a richer, more descriptive understanding of economic behavior than pure rational models.42, 43
Key Takeaways
- Fungibility Violation: Mentale buchfuehrung leads individuals to treat money as non-fungible, assigning different values or spending propensities based on its origin or intended purpose.41
- Behavioral Impact: It profoundly influences everyday financial behaviors, including how people save, spend, and manage their investments.39, 40
- Irrational Decisions: This cognitive bias can result in suboptimal or irrational decisions, such as simultaneously holding high-interest debt and low-interest savings.38
- Self-Control Mechanism: While often leading to biases, mental accounting can also serve as a self-control tool, helping individuals adhere to budgeting goals by categorizing funds.36, 37
Interpreting the Mentale buchfuehrung
Understanding mentale buchfuehrung involves recognizing how individuals implicitly or explicitly categorize their financial resources and how these categories influence their subsequent financial planning and risk tolerance. For example, "windfall gains" like lottery winnings, inheritances, or tax refunds are often mentally placed into a different account than regular income.33, 34, 35 This "found money" account is frequently associated with less stringent spending rules, leading individuals to spend it more freely on discretionary items or luxuries, rather than saving it or using it to pay down debt.31, 32 Conversely, money earned through hard work is often placed in a "hard-earned money" account, subject to stricter budgeting and more utilitarian consumption.30 This subjective categorization highlights that people often respond to the source of money as much as its absolute value, affecting how they interpret their financial position and make economic choices.
Hypothetical Example
Consider Sarah, who receives an unexpected work bonus of $1,000. Instead of adding it to her general savings account or using it to pay down a credit card with a high interest rate, she mentally labels it as "fun money." She then decides to use the entire $1,000 for a weekend getaway.
A few weeks later, her car unexpectedly needs a $1,000 repair. Although she has more than enough in her general savings, she feels a strong aversion to using "her savings" for this unplanned expense. Instead, she considers taking out a small loan, or using money from a different mental account she has for "major purchases," even though the loan would incur interest, and the money for major purchases was earmarked for something else entirely. This illustrates how her internal categorization of the bonus as "fun money" led her to spend it differently than she would regular income, and how her reluctance to dip into "savings" for a car repair, despite it being financially sound, is a manifestation of mentale buchfuehrung. This behavior can also be linked to the sunk cost fallacy, where past mental allocation influences future decisions, ignoring the true opportunity cost of her actions.
Practical Applications
Mentale buchfuehrung has several practical applications across personal finance, consumer behavior, and public policy:
- Personal Finance and Budgeting: Individuals often employ mental accounting as a crude form of budgeting, creating mental "envelopes" for different spending categories like groceries, entertainment, or housing. While it can help with self-control, it can also lead to suboptimal allocations, such as maintaining a low-interest savings account while carrying high-interest credit card debt.29
- Investment Decisions: Investors frequently engage in mentale buchfuehrung by segmenting their portfolio management. They might create separate "safe" accounts for retirement and "speculative" accounts for riskier ventures.28 This can lead to irrational investment decisions, where losses in a "speculative" account are treated differently than losses in a "safe" account, even though all money is fungible within the overall portfolio.27 Research has shown that mental accounting significantly influences investor behavior, with studies finding that it affects how investors respond to gains and losses, and even how they allocate funds within retirement plans.25, 26 For example, a paper by Shlomo Benartzi and Richard Thaler noted how mental accounting can impact the allocation of funds to defined contribution retirement plans.23, 24
- Consumer Behavior: The concept helps explain why people spend tax refunds or unexpected bonuses more readily than regular income, treating them as "windfalls" rather than part of their overall wealth.19, 20, 21, 22 A New York Times article highlighted this, discussing how people often view tax refunds as a psychological windfall rather than just a return of overpaid taxes.18
- Public Policy and Marketing: Policy-makers and businesses can use insights from mental accounting to influence behavior. For instance, the "Save More Tomorrow" program, co-developed by Richard Thaler, leverages mental accounting by encouraging workers to commit future pay raises to retirement savings, making the saving feel less like a "loss" from their current income.16, 17 Banks also offer multiple accounts with specific savings goal labels, making mental accounting explicit and helping customers save for different objectives.15
Limitations and Criticisms
While Centrale buchfuehrung offers valuable insights into human economic behavior, it also faces certain limitations and criticisms. One primary critique is that, like many concepts in behavioral economics, it describes observed behaviors rather than establishing a definitive, universally applicable model of cognitive processes.14 Critics argue that the internal mental operations cannot be explicitly studied, potentially limiting the scientific validity of the theory.13
Furthermore, the "irrational" outcomes often attributed to mental accounting can sometimes have practical benefits. For example, maintaining separate "mental budgets" for different purposes, even if technically non-fungible, can help individuals exercise greater self-control and prevent overspending, particularly for those who struggle with budgeting.11, 12 However, this benefit can also lead to inflexibility, where individuals might fail to reallocate funds optimally, such as keeping money in a low-interest savings account while accruing high-interest debt, due to an endowment effect on their "savings" or an intense loss aversion related to specific "mental accounts."9, 10 The Federal Reserve Bank of San Francisco has noted that while behavioral economics, which includes mental accounting, helps explain deviations from rationality in investor behavior, the precise mechanisms are still an area of ongoing research.8 Ultimately, mental accounting provides a framework for understanding how people categorize money, but it doesn't always guarantee rational utility theory or optimal financial outcomes.
Mentale buchfuehrung vs. Framing Effect
Mentale buchfuehrung and the framing effect are closely related concepts in behavioral finance, both highlighting how the presentation or context of information influences decision-making. However, they differ in their primary focus.
Mentale buchfuehrung refers to the tendency to categorize and evaluate money or assets into separate, non-fungible mental accounts based on their source, intended use, or other subjective criteria. The core idea is that individuals treat money as if it has different "labels" or "buckets," influencing how they spend or save it. For instance, classifying a tax refund as "play money" versus a salary as "bill money" is an example of mental accounting.
The framing effect, on the other hand, describes how the way information is presented (or "framed") can influence choices, regardless of the objective facts. It's about how the wording, emphasis, or context of a choice impacts perception. For example, a medical procedure presented as having a "90% success rate" is more appealing than one described as having a "10% failure rate," even though the objective outcome is the same.
While distinct, mental accounting can be seen as a specific application of framing, where the "frame" is the mental account itself. The act of categorizing money into separate mental accounts effectively "frames" how that money is perceived and subsequently used. Both concepts underscore deviations from strict economic rationality and are central to understanding human financial psychology.
FAQs
Is mentale buchfuehrung always detrimental?
No, not necessarily. While mentale buchfuehrung can lead to suboptimal decision-making by violating the principle of fungibility, it can also serve as a useful self-control mechanism. For example, setting up distinct "mental budgets" for different spending categories can help individuals stick to their financial planning and budgeting goals, preventing overspending in certain areas.5, 6, 7
Who introduced the concept of mentale buchfuehrung?
The concept of mentale buchfuehrung was introduced and extensively developed by Richard H. Thaler, a Nobel Memorial Prize-winning economist. His work, particularly in the 1980s and 1990s, laid the foundation for understanding how individuals create and manage "mental accounts" for their money.3, 4
How does mentale buchfuehrung affect saving habits?
Mentale buchfuehrung can significantly impact saving habits. Individuals might prioritize saving money in a "vacation fund" or a "new car fund" while simultaneously carrying high-interest debt, viewing the debt and savings as belonging to different, unrelated mental accounts.2 This can lead to financially inefficient choices, as the interest paid on debt often outweighs the interest earned on savings. However, it can also motivate saving for specific goals that might otherwise be overlooked.1