Easy come, easy go
Doctoral research confirms people take more care spending money that was hard to earn, compared with money acquired easily such as a windfall. This violates the principle of fungibility – the idea that a euro can be swapped for any other euro. "Source of income shifts the reference point," writes researcher Lee Jae Ho. "I find that subjects are more risk-averse and more patient concerning hard-earned money than with easily earned money, consistent with prospect theory and loss aversion."
Splashing cash less
People increasingly opt for cashless payments, US vending machine company USA Technologies finds. Its cashless sales through 100,000 vending machines rose 37% in unit terms in May 2015, a 5% lift year on year. Average individual spend was also higher – $1.60 – when a card or mobile wallet was used; just $1.21 was spent if cash was chosen. Is the pain of paying playing a role?
Shops in Mexico have teamed up with their state pensions regulator to help people boost their pensions when they buy small items. The aim is to nudge people into adding a few pesos to the pot with a process as easy as topping up a mobile phone. A Center for Financial Inclusion blog says: "88% of contributions through these retail chains were by people who had not made voluntary contributions to their pension before.”