Fungibility: What Does It Mean?

Fungibility is the quality of being interchangeable: one dollar is worth exactly the same as any other dollar, no matter where it came from. The term applies to more than cash. Commodities like gold or oil and shares of the same stock are fungible, while a house or a piece of art is not, since no two are exactly alike. In personal finance, fungibility is the counterpoint to mental accounting, the habit of treating money differently based on its source, like spending a bonus more freely than a regular paycheck.

Remembering that money is fungible doesn't mean you can't label it. Sinking funds and savings goals are useful tools, as long as you keep the full picture in mind, especially if you're holding savings while carrying high-interest debt.