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Nayakankuppam Studied Spending Behaviors

In a column about how to help kids be financially savvy, Jonathon Clements says we're usually more careful about our spending if we are paying with cold cash rather than a credit card. To test this in your kids, try varying the form of their pocket money. One week, give them five singles. The next week, give them a $5 bill. You will likely find your children are slower to spend the $5 bill. "It seems to be perceived as having more value," says DHANANJAY NAYAKANKUPPAM, a marketing professor at the University of Iowa. "The subjective pain of parting with the $5 bill is greater than the subjective pain of parting with five $1 bills." Adults show the same tendency. In a study that appeared in the March 2006 Journal of Consumer Research, Nayakankuppam and his co-authors, Arul Mishra and Himanshu Mishra, found that people were less inclined to spend if they had, say, a $50 bill rather than 10 $5 bills.

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