Mental accounting at the kitchen table

FE Team | Published: September 12, 2025 20:44:05

Picture this: a father in a village gets money from his son working abroad. With it, he pays his daughter's school fees. Meanwhile, his neighbour, also receiving the same amount, uses it to buy rice and medicine. Same money, different choices. Why?
Economists once believed money was like water, flowing smoothly into whatever need arises. But Nobel laureate Richard Thaler showed that families don't see money this way. They treat it differently depending on where it comes from. A remittance from abroad might feel like a gift for the future, while a local wage feels like cash for daily survival.
This idea, known as "mental accounting," helps explain why remittances matter so deeply to Bangladesh. For some families, they are lifelines that keep food on the table and children clothed. For others, they become stepping-stones - school fees, a sewing machine, or even a small shop. The source of the money shapes the story families tell themselves about how it should be used.
In Bangladesh, these stories play out every day. Millions of migrants send billions of taka back home each year, making the country one of the world's top recipients of remittances. Those flows strengthen the economy but their real power shows up at kitchen tables. Parents decide whether to use that money to put meat in the curry tonight or to keep a child in school tomorrow.
Neither choice is wrong. For families under pressure, consumption comes first. Inflation bites hard and remittances cushion the blow. But when families manage to invest, remittances can transform their futures. Education paid for with a son's wages from Dubai may lift a daughter into a professional career. A loan-free rickshaw, bought with remittances, may mean steady income for years to come.
Policymakers often look at big numbers - billions flowing into banks, reserves climbing. But the real development impact depends on the quiet decisions households make. As Bangladesh continues to rely on its diaspora, we should pay closer attention to those household stories. Because at the end, the real question isn't just how much money comes in, but how families choose to use it.
Amir Fardinn Seeum
Student
East West University
seeum09@gmail.com