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Twitter’s @HiddenCash shows why we’re poor savers

Published: May 29, 2014 12:55 p.m. ET


Opinion: Spending money or saving it depends on how we get it


Asst. commentary editor

NEW YORK (MarketWatch) -- If you haven’t heard of Hidden Cash, you’ve probably been in hiding.

The lure of free lucre has transfixed the Twitterverse. What began as a wealthy San Francisco real estate investor’s “social experiment” via Twitter has gone parabolic. In less than a week, the Twitter TWTR, -0.16%  handle @HiddenCash has amassed 242,000 followers and counting as of Thursday, hoping to discover $100 in cash stashed not just in San Francisco, but now in other cities.

What would you do with $100 in found money? Many lucky folks who’ve discovered the hidden cash have spent it impulsively, and not on themselves — like the winner who bought pizza for his entire office.

Chances are, you would spend it too. It’s a funny fact of human nature, but how we treat money depends a lot on how we get it.

Suppose you did a day’s work and your boss handed you a $100 bill. It’s doubtful you would buy coworkers a round of pizza. More realistically, you’d save a bit and use the rest for basics: food, clothing, rent. Hey, big spender? Not this time.

Working for $100 holds more value to us than finding $100. Logically it shouldn’t. After all, it’s the same $100. In his Twitter experiment, the anonymous Mr. HiddenCash has spotlighted a common investor misstep known as “mental accounting,” where we funnel money into categories. In this way, found money — inheritance, lottery winnings, tax refunds — becomes spending money; hard-earned money is the “real” money.

In truth, money is what economists call “fungible,” meaning it can be used anywhere, anytime, for anything. But those common money silos — rent, food, entertainment, savings, vacation — can foster an immature relationship with money if we’re not careful.

Mental accounting isn’t always ill-conceived; it’s beneficial to financial planning and managing expenses, for instance. But compartmentalization can be myopic and mire us in short-term thinking. Broad, longer-term perspective is richer, in every sense of the word.

Consider this famous study from the psychological realm of behavioral finance: You are going to the movies and lose your ticket. Do you buy another? Most people wouldn’t. But what if you lose the cash you’d set aside to buy the ticket? In this case, most people would reach into their wallet, produce another bill, and watch the movie.

This makes no sense — money is money; either way you are paying more for the movie than you anticipated. But the perception — the mental accounting — does not always match the reality.

A money-conscious mind is a terrible thing to waste. Pay attention to mental foibles and recognize them when they surface. Then you might consider using a windfall to help pay off a debt instead of buying drinks for the house, and a surprise stock-market loss won’t push you into a must-sell panic.

Thanks @HiddenCash. We owe you a debt — or at least a slice of pizza.

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