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Sunday, March 23, 2008

What makes a tightwad

Why are some people tightwads? Is it, perhaps, an unusual physical characteristic coupled with an odd sartorial quirk? In other words, short arms and deep pockets? Or is there something more to it?

U.S. researchers have been trying to find the answer, polling 13,327 respondents over 31 months from late 2004.

The researchers were surprised to find that despite perceptions that people always overspend, chronic underspending was far more widespread than thought, with tightwads outnumbering spendthrifts by 3 to 2.

But researcher Scott Rick from the University of Pennsylvania said they found it wasn't the cost of an item or someone's income level that had an impact on their spending. Tightwads reported feeling an emotional pain when handing over their money. Spendthrifts, on the other hand, felt pleasure making a purchase.

Prof. Rick started off his research in this area when he was at Carnegie Mellon University and he and fellow researcher George Loewenstein were discussing their opposing spending habits. “He's the tightwad and I am a recovering spendthrift,” Prof. Rick said in an interview from Philadelphia Tuesday.

The resulting study, by Prof. Rick, Prof. Loewenstein and Cynthia Cryder, will be published in the Journal of Consumer Research.

In general, the researchers found that men are bigger tightwads than women; younger people are more likely to be spendthrifts than older people; and the more educated a person is, the more likely he or she is to cling on tightly to a dollar.

Also, however, “in subsequent research we found that the difference between a male tightwad and a male spendthrift is much bigger than the difference between a female tightwad and a female spendthrift.”

Prof. Rick says that men's spending decisions seem to be simpler and are more likely to be based solely on how painful it is to make the purchase. Female spending habits, however, tend to be more complex.

“Women take a lot more into account, such as how therapeutic spending will be and if it will improve their mood or not,” he said.

The study also found that females were no more likely to be tightwads than spendthrifts but males were nearly three times more likely to feel pain when parting with cash than their free-spending peers. As for the difference between being a tightwad and merely being frugal, the researchers wrote: “The evidence suggests that frugality is driven by a pleasure of saving, as compared with tightwaddism, which is driven by a pain of paying.”

But it is possible to get money out of tightwads.

They will use credit cards, although they are less likely to run up debts, and were also found to be more sensitive to marketing ploys designed to reduce spending pain.

For example, in one experiment, participants were asked if they would be willing to pay $5 to have free DVDs shipped overnight rather than waiting four weeks for delivery. The cost was framed as either a “$5 fee” or a “small $5 fee.” Spendthrifts were insensitive to the manipulation, but tightwads were 20 per cent more likely to pay the fee if it were called “small.”

Interestingly, some of the 13,327 subjects in the study were readers of The Globe and Mail, who filled in an online survey that was linked to an earlier story on Prof. Rick's research that appeared on globeandmail.com.

“They were our most extreme group by far,” said Prof. Rick. “Tightwads outnumbered spendthrifts 6 to 1.”

Original here

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