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How We Spend Affects How Much We Spend Essay

Ladies, we may never notice it but we spend less when paying cash rather than using credit, cash-equivalent scrip or gift certificates. We can also spend less when we have to detail our daily estimated expenses. There were four studies done that examined 2 factors in women’s purchasing behavior; when we part with our money (cash versus credit) and the form of payment we made (cash, credit card, cash-like scrip or gift certificates). The conclusion is that cash discourages spending, and credit or gift cards encourage it.

Priya Raghubir, PhD of New York University, and Joydeep Srivastava, PhD of University of Maryland asked several women to read buying scenarios and answer questions about how much they would spend using cash versus various cash equivalents. In the first study, 114 participants estimated how much they would pay using various payment forms for a restaurant meal. The results showed that women are willing to spend more when they use a credit card than when using cash. In the second study, 57 women estimated food expenses for an imaginary Thanksgiving dinner item by item, rather than a holistic total.

Results showed that cash-credit spending gap closed. It no longer mattered whether they used cash or something else. In Study 3, 28 participants given a detailed shopping list were found to spend more when they used $50 gift certificate instead of $50 cash. In Study 4, 130 women were given the option to buy candy for $1 cash or a $1 gift certificate. At first, they were more willing to spend the gift certificate than the cash but after holding the it for an hour, thus treating it like cash, they became less likely to spend it – a sign that they had assimilated its value.

Thus, it appears that simple manipulations can alter our spending behavior. We tend to treat less transparent payment forms like play money so we easily spent it – a major factor that can push us to overspending. References: American Psychological Association (2008, September 9). How You Spend Affects How Much You Spend: Non-cash Purchases Found To Be Higher Than Cash Buys. ScienceDaily. Retrieved September 10, 2008, from http://www. sciencedaily. com/releases/2008/09/080907123704. htm


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