It is a common notion that people splurge more than save. But now, a new research suggests the opposite for it has shown that tightwads or penny-pinchers outnumber spendthrifts.
The study, conducted by Scott Rick from University of Pennsylvania, Cynthia Cryder, and George Loewenstein from Carnegie Mellon University, is based on a recent international survey of more than 13,000 shoppers, which revealed that tightwads outnumber spendthrifts by a 3 to 2 ratio.
In the study, the researchers found that tightwads save, not because they care more about the future than spendthrifts, but because forking out the money is too painful for them.
This is the reason why people who experience the pain of spending money more intensely tend to spend less than they would ideally like to spend.
And spendthrifts typically experience minimal pain when spending money and tend to spend more than they would ideally like to spend.
'Spending differences between tightwads and spendthrifts are greatest in situations that amplify the pain of paying and smallest in situations that diminish the pain of paying,' the researchers said.
'The evidence suggests that frugality is driven by a pleasure of saving, as compared with tightwaddism, which is driven by a pain of paying,' they added.
During the study, the researchers also found that tightwads and spendthrifts differ demographically.
They found that women are no more likely to be tightwads than spendthrifts, but man are nearly three times more likely to be tightwads than spendthrifts.
The study also showed that respondents under the age of 30 were only slightly more likely to be tightwads than spendthrifts, but respondents over 70 were five times more likely to be tightwads than spendthrifts.
The researchers found that whether one is a spendthrift or a tightwad also predicts a wide range of spending behaviour.
Spendthrifts are no more likely than tightwads to use credit cards, but spendthrifts who use credit cards are three times more likely to carry debt than tightwads who use credit cards.
Annual income differs little between tightwads and spendthrifts, suggesting that the observed differences in debt are largely driven by differences in spending habits.
The researchers also found that tightwads are also most sensitive to marketing ploys designed to reduce the pain of paying.
In one study, participants were asked whether they would be willing to pay 5 dollars to have DVDs shipped overnight. The cost was either framed as a 5-dollar fee or a small 5-dollar fee.
It was found that spendthrifts were completely insensitive to the manipulation, but tightwads were 20 percent more likely to pay the fee when it was less painfully presented as 'small.'
'The research provides a new perspective on spending and saving money. Whereas traditional economic theory assumes that the propensity to spend or save is largely determined by the degree to which one cares about the future, this research suggests that spending and saving are driven, at least in part, by more immediate emotional concerns,' the researchers said.
The study is published in the Journal of Consumer Research.