The money in the jar

A simple experiment has been repeated in many countries. People are given a sum of money and asked to divide it between now and later. Those who keep their savings in a separate place — a different jar, a different account — save noticeably more than those who keep everything together, even though the rules and the amounts are identical.

The reason is not mathematical. One hundred thousand dong is one hundred thousand dong wherever it sits. What changes is how easy it is to spend without deciding to. Money in a general pile gets used a little at a time, and no single small spend feels like a decision. Money in a labelled jar requires an act: you must open that jar, which means admitting to yourself what you are doing.

Economists call this mental accounting, and for a long time it was treated as a mistake, since a rational person should treat all money as interchangeable. The modern view is kinder. Separating money is a way of making a decision once, in advance, when you are calm, instead of thirty times later when you are tired and the thing in front of you looks appealing.

This is why advice to 'just be disciplined' tends to fail while a separate account tends to work. The first asks you to win an argument with yourself every day. The second removes the argument.