How to raise money-smart kids?
Materialism and money management
Endorsement of materialistic values can have an impact on our financial decisions. In several of our studies, we asked the respondent to allocate $100 of windfall into three possible uses: (a) money to buy things (b) money for saving, and (c) money to donate to charity organizations.
The mean allocation of $100 was as follows:
Regression Line Chart
In the below diagram, there are three regression lines. Each line represents the result of one regression analysis. The predicted variable was the mean amount allocated to either spending, saving, or donating. The predicting variable was the mean materialism score (scale 1 to 5).
The regression results can be summarized in the below table
Table Summary of three regression analysis for predicting spending, saving, and donating using materialistic value scores as a predictor (N = 1,559)
Line 1 (spending)
Line 2 (saving)
Line 3 (donating)
Based on the regression lines, it was found that respondents’ materialism score was a significant predictor of how they would allocate the $100. Respondents with high materialistic value scores would spend more, save less, and donate less to charity organizations. The R square values were 0.10, 0.05, and 0.03 for a prediction of spending, saving, and donating respectively. The order of magnitudes of R square values indicates that materialistic value has a higher predictive power for spending, less for saving, and even less for donating.
Undesirable effects of materialism
- Excessive consumption and shopaholics
Individuals who are materialistic have an urge to consume, even when basic necessities are met. They may have difficulties differentiating needs and wants. They want to prove that they are cool and successful by having lots of possessions, especially luxurious products or branded goods. Excessive consumption is the fundamental problem under materialism. To go to that extreme, they can become compulsive buyers. They cannot stop consuming even though they cannot afford the goods and repay the debts. They consume not because they need the products, but to fill their unlimited desire and sense of emptiness. Edwards (1992) defines compulsive buying as a chronic, abnormal form of spending characterized by a pattern of overpowering, uncontrollable, and repetitive urge to buy.
- Falling into the trap of debt
Materialistic youths regard possessions as a source of happiness and a way to release stress. If they cannot afford to buy what they want, but buy it anyway using credit, they will easily incur a large amount of debt. If they cannot clear the debt every month, the debt will roll up in a exponential manner. They may need to borrow money from family members or friends to repay the debt. They may even go into bankruptcy.
According to a social worker, the number of post-80’s and post-90’s generation people seeking help for debt has increased. A male student, with an associate degree, incurred a debt of HK$90,000 because of an overseas vacation trip with his girlfriend. According to Mr. Henry Chan, Supervisor of Tung Wah Group of Hospitals Healthy Budgeting Family Debt Counseling Centre, the youngest client they counselled for bankruptcy was only 22 years old.
- Tempted to get quick money
Materialistic girls and boys may desire to gain quick money for designer clothes, bags and cosmetics. These teenagers might be tempted to practise compensated dating or become a Part-Time Girlfriend/Boyfriend (PTGF/PTBF) to earn easy money in order to fulfill their unlimited desire for possessions.
They might also be tempted by illegal activities such as drug selling or drug trafficking.
Edwards, E.A. (1992). The measurement and modeling of compulsive buying behavior. Dissertation Abstracts International, 53(11-A), UM9308304.
崇尚物質主義的年輕人都擁有強烈的購物慾，他們難以區分“需要”和“想要”，一心希望透過擁有的物質尤其是名牌產品，來表達自己的時尚與成功。過度消費是物質主義的根本問題，更甚者會養成強迫性購物的習慣。即使負擔不起消費及償還欠債，他們仍不能停止消費。學者Elizabeth Anne Edwards解釋，強迫性購物是一種習慣性的、不正常的消費模式，其特點是無法抵抗、無法自拔以及重複性。
Parents alert: Discuss consumption and money management with your child
Daughter: “Mum, would you please buy me this bag for $8,000? All my best friends have it!”
Teach your children to differentiate between their needs and wants. Tell them it is not necessary to compare possessions with peers. Encourage them to buy things that are within their means and are able to reflect their own style.
Son: “Mum, I don’t want these local brands. They are so cheap. I want luxurious branded goods! They are better. I don’t want my friends to look down at me.”
Tell your children that they are far more valuable than the things they own. Possessions are only one of the ways to express themselves. Their identity can be constructed from personality, hobbies, interest, and activities.
Daughter: “Mum, I am very stressed out because of my examinations. Would you please give me $1,000 for shopping so that I can blow off some steam?”
Tell your children that spending cannot release anxiety and negative emotion. If they buy something just because of the bad feelings but do not really need it, they might feel guilty after that and may even become more upset. At the same time, you should encourage them to adopt alternative ways to release stress, such as hiking and doing sports with friends.
Your son/daughter buys or owns things that far exceeds their means
Ask them how are they able to get those items. You should ask them to show you their credit card or bank statement. Help your children’s basic money management skills such as setting a budget for saving, keeping track of expenses, as well as balancing income and expenses.
You discover that your son/daughter is struggling with debts.
Don’t blame them for the behavior but rather encourage them to search for help from professionals, financial consultants, or social workers. Let them know that they are responsible for their debt and you are there to support them. You may suggest to them to cut using credit cards for a period of time.
The Investor Education Centre developed a web site about money management for people at different life stages. You can find useful tips for parents there: