Spendthrifts and Tightwads in Childhood: Feelings about Spending Predict Children's Financial Decision Making

Abstract

Adults differ in the extent to which they find spending money to be distressing; "tightwads" find spending money painful, and "spendthrifts" do not find spending painful enough. This affective dimension has been reliably measured in adults and predicts a variety of important financial behaviors and outcomes (e.g., saving behavior and credit scores). Although children's financial behavior has also received attention, feelings about spending have not been studied in children, as they have in adults. We measured the spendthrift-tightwad (ST-TW) construct in children for the first time, with a sample of 5-to 10-year-old children (N = 225). Children across the entire age range were able to reliably report on their affective responses to spending and saving, and children's ST-TW scores were related to parent reports of children's temperament and financial behavior. Further, children's ST-TW scores were predictive of whether they chose to save or spend money in the lab, even after controlling for age and how much they liked the offered items. Our novel findings-that children's feelings about spending and saving can be measured from an early age and relate to their behavior with money-are discussed with regard to theoretical and practical implications.

Children and Consumer Behavior: Insights, Questions, and New Frontiers

“…To the contrary, in our own research, we find that young children, too, vary on the tightwad/spendthrift dimension (Smith, Echelbarger, Gelman, & Rick, 2018). We have found that children as young as 5 years can accurately report on their spending orientation, that these feelings accord with parent reports, and that these feelings have predictive utility (i.e., they predict whether children will spend or save $1 we give them; Smith et al, 2018). Thus, experience with money and spending alone cannot explain how these feelings develop-though, without examining these "adult" responses in children, we would be left with an incomplete understanding of their origins.…”

“…One possibility is that such differences emerge from years of experience handling one's own finances, such that children start out as spendthrifts and only gradually over time do we see some individuals shifting toward tightwaddism. To the contrary, in our own research, we find that young children, too, vary on the tightwad/spendthrift dimension (Smith, Echelbarger, Gelman, & Rick, ). We have found that children as young as 5 years can accurately report on their spending orientation, that these feelings accord with parent reports, and that these feelings have predictive utility (i.e., they predict whether children will spend or save $1 we give them; Smith et al., ).…”

Spend as I say, not as I do: Children, families and household consumption in different socio‐economic contexts

“…Research has examined how money is managed, how consumption priorities are established and how gratification is postponed within households. Concomitantly, investigation on how children are taught by their families about consumption and money has also been undertaken, emphasis being put in educational differentials stemming from economic and social capital (Luhr, 2018;Smith, Echelbarger, Gelman, & Rick, 2017).…”

Towards an Understanding of Low-Income Individuals’ Financial Resiliency: Exploration of Risk Preferences, Personality Traits, and Savings Behavior

“…For instance, the extent to which adults (and even children) may find spending money to be painful, can be used to predict key financial behaviors and outcomes (e.g., credit scores, savings behavior, etc.) (Smith et al, 2018). Which in turn may help explain why consumers' financial health can be predicted using their aversion to high-cost financial products and services (Greenberg et al, 2020).…”