Spendthrifts or Tightwads?

Spenders or savers? Instant gratification shopper or Ebenezer Scrooge-style miser? Most of us fall into one camp or another when it comes to making financial decisions. But do our children also have strong feelings about spending money at an early age?
To learn more about children’s feelings on spending and saving, a recent University of Michigan study was conducted in the Living Lab at the Ann Arbor Hands-On Museum, examining the responses of children, ages 5 to 10, to spending behavior.

Dr. Craig Smith, research investigator at the UM Center for Human Growth and Development, was the lead author of the study and said what the study revealed was surprising.

“Participants were asked a number of questions about their emotional reactions to spending and saving, such as whether they felt mostly good or mostly bad when spending money, and whether they viewed saving money as boring or enjoyable. Children’s answers were used to place them on a ‘tightwad’ to ‘spendthrift’ continuum,” Smith said.

“One of the big surprises to me was that, as we asked children to report on their emotional reactions to spending and saving, we were able to capture meaningful differences among children as young as 5 and 6 years of age,” Smith said. “These young kids were able to report on their own reactions to spending and saving situations, and their self-report data ended up being related to how they behaved later when they had a chance to save or spend a dollar.”

Parents know best

When parents of participants answered a brief questionnaire about their child’s spending orientation, their observations tended to confirm what children reported about themselves. On a scale of “spendthrift” to “tightwad,” children were significantly more likely to skew to the tightwad end of the spectrum, results that closely mirror those of adults in previous studies. “One of the big questions we’re exploring is ‘What are the origins of children’s emotional stances toward spending and saving?’ We’re looking at a variety of possible influences, including child temperament and socialization. We’re also interested in measuring whether parent’s spendthrift/tightwad orientations relate to those of their children.”

Conversation starters

Smith hopes that this study and future studies will allow parents and educators to have important conversations with children regarding money.

“Self-awareness is often a good thing, broadly speaking,” Smith said. “So if a parent has a child who feels bad about spending money, even when it’s totally reasonable to do so, this might be worth a conversation. For the child on the tightwad end of the continuum, it might involve talking about how saving is a great thing to practice, but that it’s not always bad to spend on things one needs or wants.”

“For the child on the spendthrift end of the spectrum, a parent could acknowledge that spending feels especially exciting to the child, but that spending because it feels good means losing out on things in the future.”

For more information on this study and future studies, visit the UM Living Lab Program website umlivinglab.com.

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