Behavioural Traps - Mental accounting


Money is a perfectly convertible asset, in the sense that €100 salary, €100 inheritance or €100 found in a pocket should have exactly the same value. Yet in reality, it's not like that at all for many people. We treat money differently depending on where it comes from, and on how we keep it or spend it. The explanation for this is known as mental accounting, namely the tendency we all have to divide the money we have into different partitions or mental accounts. Mental accounting teaches us that our behaviour changes according to the context and the financial decisions we have to make.