Maintaining savings is an important financial goal. Nonetheless, there are times when savings should be spent; for example, when people face unavoidable costs and spending savings means avoiding high-interest rate debt.  However, economic research has found that people commonly take on additional debt to avoid drawing down savings.  Over 90 percent of credit card borrowers hold liquid assets and one-third of individuals carrying credit card debt simultaneously hold more than one month’s worth of income in liquid savings (Gross & Souleles, 2002).  Given savings accounts yielding 1-2% interest and credit card interest charges averaging over 16%, this behavior can be financially costly.  Here, we examine how mental accounting (e.g., Thaler 1985, 1999) contributes to this pattern.  Specifically, we explore whether people will spend their savings when they need money most: emergencies.  Across three studies, we find that people’s tendency to preserve savings in favor of borrowing from a high interest-rate credit card varies as a function of the savings’ intended use.  Considerations of personal responsibility and the desire to preserve a positive self and social image underlie this pattern.  Paradoxically, people are most likely to turn to high interest-rate credit under the belief that doing so is the responsible option. 

Reported findings demonstrate that labels on spending accounts can lead people to make costly financial decisions to preserve savings that they value.  Results suggest that people make the most costly and arguably irresponsible financial decisions around maintaining savings that they consider fundamental to perceptions of their own personal financial responsibility.  In particular, people may be overgeneralizing from situations where the alternative to preserving savings is indulging in a tempting luxury item—when they should be accumulating wealth— to situations where the alternative is borrowing at a higher cost—when they should be decumulating wealth.  Significant public and private resources are expended to promote savings and asset accumulation, particularly among low and moderate income families. Efforts to promote savings should be accompanied by strategies that encourage and incentivize appropriate dissaving.  Given individuals’ propensity to “protect” their sacred savings in emergencies by turning to credit, policies encouraging savings should be coupled with efforts to promote access to high quality, low cost small dollar credit.