The thinking man's ape

Savings Aren’t Savings Unless They’re Actually Saved

During a jog this week, something  happened that many joggers have experienced before.  I found money on the ground.  A small windfall like this sparked an interesting response, which was to put it in my wallet.  Where else does this money belong after all?  Certainly not on the jogging track at my local park.  So why was saving this money an unusual response?  Because according to behavioral economics, individuals are more likely to spend money they find on the ground on something frivolous².  According to “mental accounting,” a concept coined by nobel prize-winning economist Richard Thaler, people treat money differently depending on extraneous factors like it’s origin and it’s intended use.  The theory hinges upon the determinant that money has fungibility  – that is, it has properties like being interchangeable, and doesn’t have labels.²  For example, $200 found on the ground is considered “free money” that can be spent without reservation (e.g., on a nice restaurant dinner).  Even though it’s worth the same $200 that we earn from working our day jobs (or night jobs).

Along these lines, people do all kinds of irrational things that can be classified as mental accounting.  Both using and neglecting to pay-off credit cards, for example, are two dangerous edges to the plastic sword.  Allow me to explain.

For one, it’s been scientifically documented that individuals are “more willing” to pony up for a preferred item when paying via credit card is an option.¹  Furthermore, when households do have high-costing debt (i.e., in the form of credit card balances) AND a low-interest savings account that could cover the totality of their balances, they opt to hold onto both.  The reason?  They don’t want to deplete savings to pay-off debt that might be reserved for an emergency.  And there’s a concern that empty credit card balances will naturally get filled-up again.²

So what’s the best thing to do with found money?

Invest it?  Pay down your credit card balance(s)?  Take your hunny out for a night on the town?

Well….  how about a little from column A and some from column B?

With the money I found jogging this week, I spent half of it, and saved half of it; however, I actually kinda invested half and saved half.  Here’s what I mean:

As I’ve discussed recently on the blog, my latest side-hustle involves selling used clothing, jewelry, etc. at our local flea market.  The daily cost of renting a plot as a vendor runs $100, exactly half of the amount found jogging.  Despite the high startup cost and dwindling cache of goods to sell, I decided to invest in the vendor space today.   And incidentally broke even after six hours of haggling.  So despite not turning a profit, I was able to knock a few bucks of my tax bill.  Because purchasing the vendor plot (whether for daily or monthly duration) is considered a business expense.

I’d call that a win.

As for the other half of my mini-windfall, it’s tucked safely away under the mattress.  I know it won’t be accruing interest or working towards earning me dividends (e.g., if it were dropped into a brokerage or retirement account)….  But I’m a fan of the old school envelope system for budgeting.  And this has seemed to be a pretty effective budgeting system for me so far.

Again, perhaps because using cash has been scientifically documented to reduce our likelihood of spending more for preferred items.¹

Oh, a quick note on that btw; the participants used in Prelec and Simester’s (2001) study were randomly given the option to bid on play-off basketball tickets for a local professional team, tickets to a professional baseball game, or team merch.  And individuals in the credit-card check-out group typically bid more on average, compared to their cash carrying counterparts.  That was the first study in this article.

They also found (in Study 2) that participants were more willing to pay for a product that had a certain value (i.e., a gift card to a local restaurant), if the payment method involved using…..  you guessed it!  A credit-card.  Within the groups, participants attributed values (of the gift card prize) to be 36% greater when anticipating using a credit-card.

Therefore, if I had a credit-card balance still THAT’s where I would drop the entirety of my windfall.  No matter if it was $20, $200, or $2,000!

(Check out this post on the cool app Debitize, which I’ve used to become debt free.)

For now though I will do as I have described, occasioning a fairly significant tax deduction (in the form of a legitimate business expense) and keeping the rest in cash.  Maybe I’ll move a little somethin’ somethin’ over to my e-savings account too; matching the amount kept in cash, so it joins it’s fellow interest-accruing soldiers.  After all, savings isn’t savings unless its actually saved!

Feature image courtesy of “The Thinking Man’s Ape,” retrieved from: 


¹Prelec, D. & Simester, D. (2001).  “Always Leave Home Without it: A Further Investigation of

the Credit-Card Effect on Willingness to Pay,” Marketing Letters, 12:1, 5-12

²Samson, A. (2017). Mental Money: The Psychology of Subscription Payment Options,,

retrieved from: