Mental accounting (treat maths, vibes maths, all maths)
Lesson 9 of 12 in our free Money Mindset guide: a 5-minute money game with the key points below.
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Questions you'll answer
Mo keeps £300 'holiday money' in a 0% pot while owing £300 on an overdraft charging an illustrative 40% a year. Roughly how much interest would the overdraft cost over a year?
Which use of 'pots' is mental accounting working FOR you?
Quick facts
- "I returned a £30 top, so now I have £30 to spend — I made money!" → Trap. You got your own money back. Breaking even isn't profit.
- "Birthday money doesn't count" → Trap. It counts exactly as much as any other £.
- "I'll split my money into bills, food and fun pots so I can see what's left" → Real logic. Useful mental accounting! Labels that help you plan are great.
- "Saving £1 on fuel by driving 20 minutes out of my way to a cheaper garage" → Trap. The extra fuel for a 40-minute round trip can easily cost more than £1, before you count your time. Do the maths.
- "Cash in a jar isn't 'real' money" → Trap. It's very real. It's just less painful to spend.