Mental Accounting and Cash Transfers: Experimental Evidence from a Humanitarian Setting

Can mental accounting help economically disadvantaged people accumulate capital and grow their income? We conducted a field experiment with 861 refugee households in Uganda, who received unconditional cash transfers over seven months. Treatment households could divide their monthly transfers among four labeled envelopes (Education, Health, Investments, Other), while control house holds received cash in a single, unlabeled envelope. Demand for the labeled envelopes was high: 93% of treatment households opted in, and 37% were still using them a year after the program ended. Compared to the control group, treatment households significantly increased investments, particularly in lumpy assets, leading to higher income and savings one year after the end of the intervention. Effects were larger among households that kept using the envelopes, who also reported improved budgeting, planning, and spending discipline.