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Examples of mental accounting don’t get better than this:

“Me at the airport at 6am after eating my $30 meal, drinking my $12 water, and spending $80 on an Uber…all because I booked a 6am flight to save $50”.

What is mental accounting? Our tendency to weight money differently according to where it’s come from and where it’s going.

The $50 he saved was a win for the “paying for my flight” mental account.

But the money spent getting to the airport and feeding himself? Completely different...

Research confirms what you may already know to be true.

People are more likely to spend refunded money.

Let’s say you return a $100 jacket. According to Yu, Cryder and LeBoeuf (2024)  you are more likely to spend that $100 refund on a discretionary purchase than if you’d received the same amount as either income, an unexpected windfall or even a tax refund.

That’s because the money has already been designated as ‘spent’.

It feels like free money because it comes without obligation - you ...