Spending Habits: Tightwads vs. Spendthrifts
Abstract
Do you have a hard time hanging on to your money or do you have a harder time letting it go? This project shows you how to conduct a simple survey to measure how people manage their money. Find out what percentage of your classmates are 'spendthrifts' and what percentage are 'tightwads.'Objective
The goal of this project is to determine how people manage their money using analysis of survey data that you collect.Credits
Sources This project is based on:
 Rick, S.I., C. Cryder and G. Loewenstein, 2007. "Tightwads and Spendthrifts," reprint of a paper submitted to J. Consumer Res., available online at [accessed January 16, 2007] (requires Adobe Acrobat Reader): http://www.andrew.cmu.edu/user/srick/SpendthriftsTightwads.pdf.
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Introduction
Simple economic models of consumer spending behavior assume a strictly rational consumer. The rational consumer judiciously weighs the benefits of spending money on something today vs. forgoing the spending opportunity and saving the money for future opportunities. These simple models fail to account for behavior such as "impulse buying."
Understanding consumer spending patterns and what motivates individuals to spend or save is important for understanding how the economy functions as a whole. This is because, at least in developed economies, consumer spending makes up the largest part of total demand at the macroeconomic level. In the U.S., consumer spending makes up 2/3 of the gross domestic product (GDP), which is the total output of goods services.
Recently there has been an increasing interest in trying to account for emotional components of consumer behavior. This project uses a survey developed by researchers at Carnegie Mellon University in Pittsburgh, PA (Rick, Cryder, and Loewenstein, 2007). Their working hypothesis divides consumers into three categories: tightwad, not conflicted, and spendthrift. They hypothesize that tightwads experience some type of emotional 'pain' when spending money, which may prevent them from spending even on things that they need. Spendthrifts, on the other hand, derive so much pleasure from spending that they have difficulty refraining from spending even when they don't need to. The third (and largest) group experiences a good match between actual spending and their desire to spend.
Where do you think you will fall on this scale? How about the general population: do you think there will be more tightwads or spendthrifts where you live?
Terms and Concepts
In order to understand how many participants you will need for a statistically valid survey, you should understand the following terms: sample size,
 population,
 confidence level,
 margin of error (confidence interval),
 consumer spending,
 gross domestic product (GDP).
The Science Buddies resource, How Many Survey Participants Do I Need?, will show you how to figure out how many respondents you need to recruit in order to achieve your desired level of confidence that your results are representative of the total population.
In order to analyze your results, you should be familiar with the following descriptive statistics: measures of central tendency:
 mean,
 median,
 mode;
 See the Science Buddies HowTo pages on Summarizing Your Data for more information.
 measures of dispersion (for more advanced students):
 range,
 variance,
 standard deviation.
 See the Science Buddies HowTo pages on Variance and Standard Deviation for more information.
 How many people would you have to survey in order to have a 2.5% (i.e., 0.025) margin of error?
Bibliography
 This webpage calculates the sample size required for a desired confidence interval, or the confidence interval for a given a sample size:
Creative Research Systems, 2003. "Sample Size Calculator," [accessed June 28, 2006] http://www.surveysystem.com/sscalc.htm.  This website has information on statistics and statistical tests, written for the nonmathematician:
Niles, Robert, 2006. "Robert Niles' Journalism Help: Statistics Every Writer Should Know," RobertNiles.com [accessed June 28, 2006] http://www.robertniles.com/stats/.  Here is an Excel tutorial to get you started using a spreadsheet program:
Excel Easy. (n.d.). Excel Easy: #1 Excel tutorial on the net. Retrieved June 12, 2014, from http://www.exceleasy.com/  The survey used in this project is from an academic paper by researchers at Carnegie Mellon University, in Pittsburgh, PA:
Rick, S.I., C. Cryder and G. Loewenstein, 2007. "Tightwads and Spendthrifts," reprint of a paper submitted to J. Consumer Res., available online at [accessed January 16, 2007] (requires Adobe Acrobat Reader): http://www.andrew.cmu.edu/user/srick/SpendthriftsTightwads.pdf.
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Materials and Equipment
To do this experiment you will need the following materials and equipment: surveys,
 for analyzing the survey results:
 paper, pencil, and calculator or
 computer with spreadsheet program.
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I Did This Project! Please log in and let us know how things went.Experimental Procedure
Note: There are special considerations when doing a project involving human subjects. ISEFaffiliated fairs often require an Informed Consent Form for every participant who is questioned or observed. Since this project uses an anonymous survey of individual behavior, with no manipulation of behavior by the investigator and minimal risk to the participants, the informed consent requirement can be waived. However, the experimental design of the project must be approved by an Institutional Review Board prior to the commencement of experiments or surveys. Please see the Science Buddies HowTo page on Projects Involving Human Subjects and also refer to the ISEF rules for additional important requirements for studies involving human subjects: http://www.sciserv.org/isef/about/rules_regulations.asp.
Preparing and Conducting the Survey The survey (Rick, Cryder, and Loewenstein, 2007) is quite short, consisting of four questions (numbered 1, 2a, 2b, and 3). Here is a downloadable
pdf version of the following survey (and the
Adobe Acrobat reader you'll need to view it):
1. Which of the following descriptions fits you better? 1
Tightwad
(difficulty spending money)2 3 4 5 6
About the same
or neither7 8 9 10 11
Spendthrift
(difficulty controlling money)
2. Some people have trouble limiting their spending: they often spend money—for example on clothes, meals, vacations, phone calls—when they would do better not to.
Other people have trouble spending money. Perhaps because spending money makes them anxious, they often don't spend money on things they should spend it on.
a. How well does the first description fit you? That is, do you have trouble limiting your spending?
1
Never2
Rarely3
Sometimes4
Often5
Always
b. How well does the second description fit you? That is, do you have trouble spending money?1
Never2
Rarely3
Sometimes4
Often5
Always
3. Following are two scenarios describing the behavior of two shoppers. After reading about each shopper, please answer the question that follows.Mr. A is accompanying a good friend who is on a shopping spree at a local mall. When they enter a large department store, Mr. A sees that the store has a "onedayonlysale" where everything is priced 10–60% off. He realizes he doesn't need anything, yet can't resist and ends up spending almost $100 on stuff.
Mr. B is accompanying a good friend who is on a shopping spree at a local mall. When they enter a large department store, Mr. B sees that the store has a "onedayonlysale" where everything is priced 10–60% off. He figures he can get great deals on many items that he needs, yet the thought of spending the money keeps him from buying the stuff.
In terms of your own behavior, who are you more similar to, Mr. A or Mr. B?
1
Mr. A2 3
Neither4 5
Mr. B
 The steps below show how to calculate a respondent's score on the survey.
 Reversescore the answers to the last two questions (2b and 3):
 let the variable x be the respondent's answer to question 2b or 3, and
 let the variable r be the reverse score,
 r = −x + 6.
 For example, if the respondent's answer to question 2b was 2, the reversescored answer would be −2 + 6 = 4.
 The total score on the survey is simply the sum of the respondent's answers for questions 1 and 2a plus the reversescored answers for questions 2b and 3. The table below illustrates an example for a hypothetical survey response.
Question # Respondent's Answer Reverse Score
(only 2b and 3)Final Survey Score
(sum of light gray boxes)1 10 2a 4 2b 2 4 3 2 4 22
 Final survey scores can range from 4 to 26 (verify for yourself that this is true). The survey designers (Rick, Cryder, and Loewenstein, 2007) assign respondents to three categories, based on the final survey score (see the table below):
Survey Score Range Category 4–11 'tightwad' 12–18 'not conflicted' 19–26 'spendthrift'
 For the sample group that the survey designers studied, the 'tightwad' category is essentially all scores that were more than one standard deviation below the mean. The 'spendthrift' category is essentially all scores that were more than one standard deviation above the mean. The 'not conflicted' category is essentially all scores that were within one standard deviation from the mean.
 Our hypothetical respondent with a score of 22 would be classified as a 'spendthrift.'
 Reversescore the answers to the last two questions (2b and 3):
 Determine how many participants you need.
 Tips for administering the survey:
 The survey results should be anonymous, so do not ask for any identifying information on the response sheets.
 To conduct the study, you can look for volunteers at a busy shopping center or other public gathering place (adult supervision highly recommended).
 Alternatively, you could seek permission to conduct the survey at school.
Tabulating and Analyzing Results
 Calculate the score for each survey, using the method described above (Preparing and Conducting the Survey, step 2).
 Count how many respondents fall into each of the three categories: 'tightwad', 'not conflicted', and 'spendthrift' (Preparing and Conducting the Survey, step 2c).
 More advanced students should also calculate the mean and standard deviation of the survey scores. How closely do the three different categories correspond to dividing the responses into groups according to the mean ± one standard deviation?
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 Do this project together with a friend or relative who lives in a different geographic area. Each of you should survey a group in your own local area, then compare your results. Are the proportions of 'tightwads' and 'spendthrifts' similar or different between the two geographic areas? Are the results what you expected they would be?
 Do you think males and females will have the same proportions of 'tightwads' and 'spendthrifts'? Add a gender identification response to the survey and find out! Remember that you will need to double the number of survey respondents in order to maintain the same confidence interval for the responses from each group.
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