Abstract
In recent years South Africa has experienced extensive economic challenges and as a result individual household savings and debt rates have decreased and increased, respectively. In aiming to contribute to the knowledge of factors that may contribute to South Africans’ financial behaviours, this study aims to investigate the presence of mental accounting and its concepts on the saving and debt behaviour of South African citizens. Mental accounting theory combines microeconomics and cognitive psychology, to predict investor behaviour. Throughout the years, mental accounting theory has been extended by authors such as Heath & Soll (1996) and Prelec & Loewenstein (1998). The methodologies employed by these authors were adopted in this study to determine whether the behavioural concepts of mental accounting exist in South Africans’ behaviour as it pertains to saving and debt. In this study, it was found that the perceived priority respondents placed on saving and debt items may have an impact on whether they save for or acquire debt for that item. Evidence of fungibility and prospect accounting amongst respondents and how these may influence respondents’ saving and debt behaviour was also found.