Paper currency vs. plastic: Times when money isn’t real

Money is money, whether it’s cash in our hands, plastic cards at checkout counters or encrypted bits of data coursing between computers on the internet.

But our brains don’t view all money as equal, thanks to what behavioral economists call “cognitive biases”:

• We spend cash more carefully than plastic.

• We regard tax refunds as a windfall rather than a return of what we earned.

• We’d rather have money now than more money later.

Sometimes our illusions about money can be harnessed for good. The “Save More Tomorrow” program, created by economists Richard H. Thaler and Shlomo Benartzi, has people commit to increasing their retirement contributions starting one year in the future. In the economists’ initial study, workers who agreed to save future dollars nearly quadrupled their savings rate in four years.

When we treat some forms of money as less real than others, it can really cost us. For example:

Time-shares and recreational vehicles often are pitched as a way to save on future vacations. Anyone who has owned either knows that’s not necessarily true. First-time RV buyers, for example, often underestimate the costs of maintaining, repairing and fueling their rigs. Time-share newbies can be gobsmacked by rising annual fees, the hassles of trading their units and the difficulty of shedding unwanted timeshares.

If you’re determined to buy, pay cash for secondhand versions.

A brand-new 2017 Fleetwood Storm RV costs six figures; we picked up a 1998 model with less than 7,500 miles on it a few years ago for $15,000.

We loosen the purse strings on vacation because we want to relax and not stress over every purchase. As a result, six out of 10 people overspend their summer vacation budgets, according to a survey last year for Citi ThankYou Premier Card. Add in confusion about exchange rates, and it can feel like the foreign currency in your hand is just play money.

Check exchange rates before you leave, then use a calculator or a currency exchange app to check prices on the fly.

High-deductible insurance plans are supposed to make us more careful about our health care spending, because we have to shell out more of our own money before insurance takes over.

What high-deductible plans can do is cause people to put off seeing the doctor, which ultimately can result in much bigger bills for treatment.

The solution is to use mental accounting, another thinking flaw, to your advantage.

If you opt for a high-deductible plan, make sure that you keep enough cash earmarked in savings to cover that deductible and that you use it to stay current on your health care.