Mental accounting is a behavioral construct considered in economic psychology as an essential variable in explaining the saving and consumption behavior of consumers. Consumers employ mental accounting techniques to track their financial activities using account labels and rules. The presence of account labels influences the decision to spend. In the BLC model, the marginal propensity to consume is assumed to be account specific and based on a consumer’s financial wealth. Financial wealth is determined by the components of the consumer’s lifetime financial resources. The lifetime financial resources consist of wealth being divided into three mental accounts; disposable income, investable assets, and future income. Using the BLC as a theoretical framework, this study argued that the behavioral constructs of mental accounting impacted the spending and saving behavior of consumers based on their attitude and behavior towards the use of investable assets and spending …show more content…
Behavior focused on saving was identified by consumers who disagree that they would spend more if their assets appreciated in value and agree that they would spend less if their assets depreciated in value. The model predicts that consumers displaying this type of behavior would be expected to possess loan balances for goods and services that amount to 22% more than consumers who don’t employ mental accounting techniques focused on saving. When examining the descriptive statistics outlined in this study, the prediction of the model is not supported when comparing saving behavior to spending behavior, as consumers employing behavioral techniques that promote spending had higher debt balances in all categories of debt. When comparing the results of saving behavior to those of consumers not employing mental accounting techniques, consumers employing saving behavior had a higher mean balance of loans for goods and services, and a lower mean balance of home equity debt and pension loan debt. In both models, the mental accounting coefficient that illustrates the propensity to save was statistically