Mental Accounting for Dummies

The Bank of America’s Keep the Change program freaks me out.   Every time you make a charge with your B of A debit card it rounds the figure up to the nearest whole amount and transfers the change to your checking account.*  Commercials for this service are all over the television and radio – tagline: “you don’t even have to think about saving” – and every time I see one I feel the gulf between me and the rest of humanity widening (MR readers excepted of course).

Look, I can understand Ulysses tying himself to the mast, I can understand locking the refrigerator and I can understand Christmas accounts but I will never understand how anyone can increase their savings by taking money from one account and putting it into another.  I think I will write a book, I will call it Mental Accounting for Dummies:

The secret to saving more money is simple.  In your right hand is money for spending.  In your left hand is money for savings.  Now take some money from your right hand and put it into your left hand.  Tada!  Wasn’t that easy?

Millions have signed up for Keep the Change and the program has been written up by Business Week as "a radically different product that broke the paradigm."  Sigh.

* n.b. It is true that B of A tops up the amount transferred but this part of the program, the only part that makes any sense, is hardly advertised at all.


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