Journal of Economic Psychology 24 (2003) 723–739

www.elsevier.com/locate/joep

The relationship of materialism to

spending tendencies, saving, and debt
John J. Watson *

Department of Management, University of Canterbury, Private Bag 4800, Christchurch, New Zealand
Received 26 March 1999; received in revised form 15 November 2000; accepted 27 June 2003

Abstract

This study is a response to the Richins and Rudmin [J. Econ. Psychol. 15 (1994) 217–231]
call for work examining the relationship between materialism and aspects of economic psy-
chology. The research was designed to investigate how people with differing levels of materi-
alism vary in their propensity to spend and/or save and their attitudes and behaviors toward
borrowing money. The results indicate that highly materialistic people are more likely to view
themselves as spenders and have more favorable attitudes toward borrowing. These differences
were evident in behavioral measures, although the differences were strongest for behaviors re-
lated to debt rather than saving. The implications of these findings for establishing a more
comprehensive view of materialism in modern society are discussed.
Ó 2003 Elsevier B.V. All rights reserved.

PsycINFO classification: 2900; 3920

JEL classification: D120; D310
Keywords: Materialism; Resource allocation

1. Introduction

The importance of consumer spending in relation to the economy and the role
that materialistic tendencies play in consumption would dictate that an understand-
ing of the relationship between materialism and spending/saving tendencies has great
relevance to economic psychology and should elicit more interest from researchers

*
Tel.: +64-3-364-2020; fax: +64-3-364-2606.
E-mail address: john.watson@canterbury.ac.nz (J.J. Watson).

0167-4870/$ - see front matter Ó 2003 Elsevier B.V. All rights reserved.
doi:10.1016/j.joep.2003.06.001
724 J.J. Watson / Journal of Economic Psychology 24 (2003) 723–739

(Richins & Rudmin, 1994). Although a considerable amount of analysis has focused
on materialistic behavior (cf. Belk, 1985; De Tocqueville, 1835; Ger & Belk, 1996;
Heilbroner, 1956; Holt, 1998; Richins, 1994; Richins & Dawson, 1992; Veblen,
1899), researchers have only begun to examine whether materialism may be instru-
mental in helping explain the wide variation observed amongst individuals and fam-
ilies in savings and credit utilization behavior (cf. Richins & Rudmin, 1994).
Both consumer spending/saving tendencies and consumer orientations toward
credit have important implications for the strength and growth of the economy at
the macroeconomic level and for individual financial management at the microeco-
nomic level (Katona, 1975; Magrabi, Chung, Cha, & Yang, 1991). The growth of
consumption explains about 80% of the average quarterly growth of the gross na-
tional product (GNP) in America (Maital, 1982). With a nominal GNP in excess
of $5000 billion, an aggregate change as ‘‘minimal’’ as 1% in the income consumers
devote to savings or consumption could mean the difference between strong eco-
nomic markets and a recession. At the microeconomic level, consumers in developed
countries are borrowing money at unprecedented levels. In the UK, household sector
debt has increased from £ 574 billion in 1997 to £ 666 in 1999 (Hansard, 2000). In
Canada in 1998, average personal debt was greater than average disposable income
for the first time since Statistics Canada began keeping such records in 1961 (Chis-
holm, 1999). And in the United States, nonmortgage debt in 1998 was $1.3 trillion,
or about $4600 for every man, woman, and child in the country (Gray, 1998). As the
number of credit cards, credit card limits, and the level of demographically initiated
credit card debt have increased, so too have the number of bankruptcy filings (Wel-
ler, 1997). As such, an examination of the relationship between materialism (defined
as a value as per Richins & Dawson, 1992) and aspects of individual financial man-
agement or, more specifically, between materialism and attitudes/behaviors related
to both saving and spending seems prudent. Consequently, the research question
guiding this study is:
How do people with differing levels of materialism vary in (a) their pro-
pensity to spend and/or save and (b) their attitudes and behaviors toward
borrowing money?

2. Literature review

2.1. Materialism and the tendency to save/spend

A materialistic lifestyle appears to be an integral part of modern living for devel-

oped countries. The consumption ethos of modern culture dictates that satisfaction
of many (some may argue most) of our needs are met through consumption. We buy
things and use our money to satisfy our survival needs (such as food and shelter), to
establish our social significance with the power and prestige that money and posses-
sions represent (Fugua, 1990), and to compensate for individual shortcomings such
as faulty self-esteem (Chatterjee & Farkas, 1992). Richins and Dawson (1992)
claimed that persons holding strong material values place possessions and their ac-
 J.J. Watson / Journal of Economic Psychology 24 (2003) 723–739 725

quisition at the center of their lives, value possessions as a means of achieving hap-
piness, and use possessions as indicators of their own and others’ success [see also
Belk (1985) for early definitions of materialism].
Some authors have argued that the materialism of present-day society may have
an adverse influence on saving (Katona, 1975; Lunt & Livingstone, 1992; Magrabi
et al., 1991). The result of the perceived urgency of numerous wants for consumer
goods, as well as for such services as travel and recreation, is that saving is frequently
pushed into the background. Some motives to spend may be more immediate than
the motives to save; thus, saving may be postponed, and the postponement may
be repeated over and over again.
Many theorists have attempted to explain saving behavior. Early economists dealt
in considerable detail with the psychology of saving, emphasizing social-psycholog-
ical factors such as thrift, self-control and patience. These factors were contended to
be stable over long periods of time, were presumed to be related to sociodemo-
graphic variables, and were instilled through educational instruction (Warneryd,
1989). As Pareto (1909/1971, p. 323) indicated: ‘‘Saving is only partially determined
by the income one receives from it; it results in part also from man’s desire to have in
reserve goods which can be consumed from time to time’’.
Later, Keynes (1936) argued against such a trait approach, claiming that con-
sumption was a rational response to macroeconomic factors in society and was pre-
dictable from income. Keynes (1936) identified three main saving motives: a
transaction motive, which involves saving for a large expenditure (e.g., directed at
goals or future purchases such as durables and vacations); a precautionary motive,
which is saving for emergencies, old age, children and other relatives; and a specu-
lative motive, or saving to increase wealth. Keynes (1936) also described eight main
factors which lead individuals to refrain from spending – precaution, foresight, cal-
culation, improvement, independence, enterprise, pride, and avarice – and developed
a corresponding list of motives to consume – enjoyment, shortsightedness, generos-
ity, miscalculation, ostentation, and extravagance.
Within the context of current definitions of materialism (e.g., Richins & Dawson,
1992), Keynes’ descriptions of motives to save as opposed to refraining from spend-
ing would suggest that materialistic people are spenders. For example, a primary
dimension of Richins and Dawson’s (1992) definition of materialism is ‘‘posses-
sion-defined success’’. This aspect of materialism concerns the tendency of material-
ists to judge their own and others’ success by the number and quality of possessions
accumulated. Materialistic people value possessions for the money they cost and
their ability to confer status rather than by the satisfaction they yield. As such, it
would be predicted that people with high levels of materialism (as defined by Richins
and Dawson) are more prone to be spenders than savers.
Another individual who provides a theory of saving which may be used as a plat-
form from which hypotheses about the spending/saving tendencies of people with
differing levels of materialism may be postulated is James Duesenberry. Duesenberry
(1949) proposed a theory of consumption that included social comparison as a
central process in consumption decisions. He suggested that people consumed
goods according to their perceptions of what was normal for their reference group.
726 J.J. Watson / Journal of Economic Psychology 24 (2003) 723–739

Consequently, if individuals had a high income relative to their reference group, they
would be likely to save the surplus; if they had a relatively low income, they would be
likely to accrue debt (Warneryd, 1989). This idea ties in directly with some of Ri-
chins’ earlier comments on materialism. Richins (1992) suggested that people with
high levels of materialism use people from a higher socioeconomic status (i.e., up-
ward comparison) as referents. Accordingly, in comparison to their reference group,
people with high levels of materialism will have relatively low incomes and, as a re-
sult, be more likely to accrue debts. In order to keep up with their referents, people
who are high in materialism will spend beyond their means. As such, they may also
be characterized as ‘‘spenders’’.
Despite the limited empirical work on the topic of saving/spending and material-
ism, discussion related to the relationship between materialism and spending tenden-
cies is not uncommon. Materialists have consistently been characterized as excessive
consumers who are constantly looking toward their next purchase (Belk, 1985; Four-
nier & Richins, 1991; Richins & Dawson, 1992). They relentlessly pursue material
wealth and are acquisitive by nature (Belk, 1985). Thus, it is expected that people
with high levels of materialism will be spenders, while people with low levels of ma-
terialism will be savers. Two hypotheses are posited which will test this proposition.
The first hypothesis focuses on attitudes toward spending and saving, while the sec-
ond hypothesis focuses on actual saving behaviors as per Mitchell (1983).

Hypothesis 1. In comparison to people with low levels of materialism, people with

high levels of materialism are more likely to perceive themselves as ‘‘spenders’’.

Hypothesis 2. In comparison to people with high levels of materialism, people with

low levels of materialism are more likely to (a) have an IRA (individual retirement
account), (b) own stocks or bonds, and (c) have investment real estate.

2.2. Materialism, borrowing money, and use of credit

Another aspect of financial management where the inclusion of materialism may

be beneficial is research in the area of attitudes toward borrowing money. The eco-
nomics of the day dictate that it is no longer necessary to have money at the time of
purchase in order to obtain desired possessions. With the availability of credit comes
the ability to acquire things in the present and pay for them in the future. The avail-
ability of credit has also led to changes in attitudes toward borrowing (Lunt & Liv-
ingstone, 1992); for example, it is now acceptable to borrow money for a wider
variety of reasons, such as vacations and second homes (Lunt & Livingstone,
1992). In sum, the widespread acceptance of ‘‘financed’’ purchases allows people
to satiate consumptive desires that may have been mere dreams in an earlier time.
Many authors have noted an explosion in consumer credit in the post-World War
II era. In the United States in 1970, credit outstanding was 131.6% of disposable per-
sonal income; however, this percentage has increased steadily, and in 1988 was
728.9% (Magrabi et al., 1991). In America, a large segment of consumer debt is typ-
ically automobile installment credit. In 1988, each household owed an average of
 J.J. Watson / Journal of Economic Psychology 24 (2003) 723–739 727

$7104 for automobile installment loans, $3029 for revolving credit, and $2192 in
other loans (Magrabi et al., 1991). In the UK, the average level of consumer borrow-
ing per household was approximately £ 22,800 in 1998 (Hansard, 2000), and in Brazil
consumer debt, concentrated among lower-income households, now exceeds $6 bil-
lion (United Nations, 2000). According to Hansard (2000), household saving in the
UK has fallen from £ 50.3 billion between April 1997 and March 1998 to £ 32.9 bil-
lion between April 1998 and March 1999, and such trends are becoming quite com-
mon. In Canada, the rate of saving as a percentage of disposable income has
dropped from 9.5% in 1961 to 1.2% in 1998 (Chisholm, 1999).
Maital (1982) has noted that a credit card consumer psychology is rampant. ‘‘Peo-
ple may be strapped for funds and have little left over to save. But they appear to be
unconcerned. Part of this lack of concern must be due to the pervasiveness of credit
cards. They offer a discretionary means of evening out spending levels and tiding the
family over temporary rough times’’ (Maital, 1982, p. 148).
The rapid rise in consumer debt and its repercussions for both the individual and
society has been cause for concern. Hirschman (1991) called for consumer research-
ers to address this ‘‘darker side’’ of consumer behavior. Lunt and Livingstone (1991)
suggested that debt is part of a more general concern about the rise of consumerism
and the changing moral climate of borrowing and spending. These trends also have
significant implications for research on materialism. In order to satisfy their strong
acquisitive desires, people with high levels of materialism may be more willing to as-
sume debt (Richins & Rudmin, 1994) and would therefore be more likely to have a
positive attitude towards debt than non-materialistic people. This position is also
supported by Duesenberry’s theory of consumption; individuals with low incomes
in comparison to their referents (i.e., people with high levels of materialism), may
be more likely to accrue debts as they attempt to maintain a standard of living that
is above their financial means.
There is some work which has relevance to the topic of materialism and attitudes/
behaviors toward debt – studies of desired income and materialism. Richins and
Dawson (1992) measured material values in a broad cross-section of the population
and found a strong relationship between materialism and desired income; the income
deemed necessary to satisfy needs was about 50% higher for consumers high in ma-
terialism than for those low in materialism. Based on these findings, it could be in-
ferred that those people with high levels of materialism may have more favorable
attitudes toward borrowing money and may be more likely (may find it ‘‘necessary’’)
to borrow money in order to achieve their material desires. As such, they may be
more willing to take on debt. Therefore, it is hypothesized that:

Hypothesis 3. In comparison to people with low levels of materialism, people with high
levels of materialism will have more favorable attitudes toward the allocation of future
earnings in order to satisfy their present consumption desires (i.e., borrow money).

Hypothesis 4. In comparison to people with low levels of materialism, people with

high levels of materialism (a) are more likely to use installment credit, (b) have more
credit cards, and (c) have loans of more than $1000.
728 J.J. Watson / Journal of Economic Psychology 24 (2003) 723–739

3. Method

3.1. Instruments

In order to address the research question and examine the hypotheses discussed
above, it was necessary to determine respondents’ levels of materialism, their propen-
sity to save/spend, and their attitudes and behaviors toward borrowing. The instru-
ments used to measure each of these variables are described below.

3.2. Materialism

The Richins and Dawson (1992) materialism scale was used to measure individual
levels of materialism. Operationally, Richins and Dawson (1992) define materialism
in terms of the importance of possessions and acquisition (centrality), the role acqui-
sition plays in the pursuit of happiness (happiness), and the use of possessions as an
indicator of success in life (success). The scale consists of 18 items encompassing the
three factors. The items were scored on a 5-point Likert format from ‘‘strongly
agree’’ to ‘‘strongly disagree’’. All 18 items were summed to form an overall materi-
alism score. Coefficient alpha for the overall materialism scale was 0.83.

3.3. Propensity to save/spend

A measure of consumer spending known as ‘‘spending tendency’’ (Heslin & Frey,

1995) was used to examine the spending/saving tendencies of people with high levels
of materialism and people with low levels of materialism. ‘‘Spending tendency’’ is
one of the seven consumer characteristics within the Consumer Personality Ques-
tionnaire (CPQ) (Heslin & Frey, 1995). It is a 20-item scale that attempts to identify
people who spend to (and maybe beyond) their financial limit. The low scorer may be
characterized as a budgeter, someone who may be called ‘‘cheap’’, and a high scorer
may be characterized as a spendthrift. Of the 20 items of the spending tendency sub-
scale of the CPQ, 10 items are positively related to spending tendencies (e.g., ‘‘I
spend everything I earn’’ ‘‘I spend extra money quickly’’) and 10 items are negatively
related to spending tendencies (e.g., ‘‘I spend as little as possible’’ ‘‘I save as much as
I can’’). Items are scored on a 5-point Likert format from ‘‘strongly agree’’ to
‘‘strongly disagree’’. The 20 items are summed for an overall measure of spending
tendency.
The development of the CPQ scales followed recommended psychometric proce-
dures (Heslin & Frey, 1995). Preliminary testing was conducted using student and
adult samples. Heslin and Frey (1995) used test–retest correlations as an index of sta-
bility and found test–retest reliabilities for the spending tendency dimension was
0.89. They also examined the scales for social desirability bias and found little con-
tamination; none of the correlations were significant.
The Spending Tendency Scale has been significantly correlated with the Faber and
O’Guinn (1992) Tool for Classifying Compulsive Consumers (r ¼ 0:49, p < 0:0001)
and the d’Astous (1990) Compulsive Buyer Scale (r ¼ 0:42, p < 0:0019). The inter-
 J.J. Watson / Journal of Economic Psychology 24 (2003) 723–739 729

correlation between materialism (as defined and operationalized by Heslin and Frey)
with their spending tendency scale was 0.31. Cronbach alpha for this measure was
0.92 in this study.

3.4. Debt measures

This part of the instrument was derived from the work of Blackwell, Hawes, and
Talarzyk (1975). Blackwell et al. (1975) examined ‘‘long-term’’ borrowing (defined as
periods of more than three months) for 24 different types of purchases. The items were
scored on a 5-point Likert format from ‘‘strongly agree’’ to ‘‘strongly disagree’’, and
respondents were asked to ‘‘please indicate how you feel about people (in general) bor-
rowing money for over 90 days to do each of the following things’’. The list included
items related to borrowing money for cars, homes, jewelry, vacations, and medical ex-
penses, among other things. The complete list of items is provided later in the article.

3.4.1. Behavioral measures for spending and saving

Behavioral measures focusing on the use of various financial services (e.g., check-
ing and savings accounts, stock brokers), investments (e.g., real estate, stocks and
bonds, mutual funds, IRAs – individual retirement accounts), and installment credit
(via credit cards and loans) were also obtained. These measures were derived from
the instrument used by Mitchell (1983) and are listed in Appendix A.

3.5. Data collection

To test the previously stated hypotheses, data were collected by mail surveys ad-
ministered in the United States. Fundamental principles from the Dillman (1978,
1984) ‘‘Total Design Method’’ for telephone and mail surveys were applied in this
study. The data were collected from two geographic areas of Pennsylvania, one
urbanized and the other non-urbanized. Telephone directories for the two areas
served as the sampling frames. Since the total number for the planned sample was
700, it was determined that 436 households (62% of the sample) were needed from
the urbanized area and 266 households (38% of the sample) were needed from the
non-urbanized area; these numbers are consistent with the percentage of people
living within urbanized areas and outside urbanized areas in the United States.
The listings were drawn using a systematic sampling design taking the nth name
from each of the directories. Sample intervals (i.e., the number of listings to be skipped
between each listing selected) were calculated for each directory, and a procedure that
generated a random starting point near the beginning of each directory was used.
Usable questionnaires were returned by 46% of those sampled (N ¼ 322). The
sample provided a reasonable match with the United States population on three de-
mographic dimensions: location of residence (i.e., urban, rural), income, and age. 1

1
Additional details on the sampling technique, sample composition, and data collection procedures are
available upon request.
730 J.J. Watson / Journal of Economic Psychology 24 (2003) 723–739

4. Analyses and results

4.1. Defining materialism groups

Respondents who scored in the top quarter of the Richins and Dawson (1992)
materialism scale were categorized as having high levels of materialism, and respon-
dents who scored in the bottom quarter of the scale were categorized as having low
levels of materialism. The demographic characteristics of the resulting high and low
materialism groups were compared to assess equality on these variables. Analyses in-
dicate that there is no significant relationship between materialism and income, gen-
der, age, education, or marital status (see Table 1).

Table 1
Demographic characteristics of respondents in the low materialism and high materialism groups
Characteristic Low materialism High material- v2 p df
ism
n % n %
Income 4.1 0.39 4
Less than $15,000 6 7.1 7 8.2
$15,000–$24,999 12 14.3 19 22.4
$25,000–$39,999 16 19.1 21 24.7
$40,000–$74,999 39 46.4 31 36.5
$75,000 and above 11 13.1 7 8.2
Gender 1.15 0.28 1
Male 40 45.5 33 37.5
Female 48 54.5 55 62.5

Age 7.0 0.07 3

18–24 3 3.5 6 7.0
25–44 34 39.5 48 55.8
45–64 31 36.1 21 24.4
65 and over 18 20.9 11 12.8

Education 0.78 0.98 5

Grade 11 or less 2 2.3 3 3.5
Graduated high school 26 30.2 24 27.6
Technical school 4 4.7 5 5.8
Some college 17 19.8 20 23.0
Graduated college 23 26.7 23 26.4
Graduate school 14 16.3 12 13.8
Marital status 2.8 0.42 3
Never married 11 12.5 14 15.6
Married/living with 61 69.3 59 65.6
partner
Divorced or separated 7 8.0 12 13.3
Widowed 9 10.2 5 5.6
 J.J. Watson / Journal of Economic Psychology 24 (2003) 723–739 731

4.2. Hypothesis 1

A one way ANOVA was used to test Hypothesis 1 – that people with high levels
of materialism (in comparison to people with low levels of materialism) are more
likely to perceive themselves as ‘‘spenders’’. Materialism was the independent vari-
able (factor) and spending tendency was the dependent variable.
The results of the statistical procedure support H1 ; individuals with high levels of
materialism scored higher on the spending tendency scale. The mean for high mate-
rialism respondents was 2.98 (n ¼ 90; std. dev. ¼ 0.61), while the mean for low ma-
terialism respondents was 2.39 (n ¼ 88; std. dev. ¼ 0.47). These differences were
significant (F ð1; 176Þ ¼ 52:5, p ¼ 0:0001). The correlation between materialism and
spending tendency was 0.43 (p < 0:001).

4.3. Hypothesis 2

Hypothesis 2a predicted that subjects with low levels of materialism would be

more likely to have individual retirement accounts (IRAs) than subjects with low lev-
els of materialism. This hypothesis was not supported by the data. Forty-eight per-
cent (n ¼ 42) of the low materialism respondents reported that they had IRAs, while
42.7% (n ¼ 38) of the high materialism respondents reported that they had IRAs
(v2 ¼ 0:55, df ¼ 1, p ¼ 0:46).
Hypothesis 2b predicted that subjects with low levels of materialism would be
more likely to own stocks or bonds than subjects with low levels of materialism. This
hypothesis was partially supported. Fifty-eight percent (n ¼ 51) of the low material-
ism respondents and 44% (n ¼ 40) of the high materialism respondents indicated that
they owned stocks or bonds, a result which approached significance (v2 ¼ 3:2,
df ¼ 1, p ¼ 0:07); and 51.2% (n ¼ 44) of the low materialism respondents versus
31.5% (n ¼ 28) of the high materialism respondents reported that they owned mutual
funds (v2 ¼ 7:0, df ¼ 1, p ¼ 0:008), which supports H2b .
It was also hypothesized that subjects with low levels of materialism are more
likely to have investment real estate than subjects with high levels of materialism
(H2c ). This hypothesis was not supported. Of the low materialism respondents,
21.6% (n ¼ 19) indicated that they owned investment real estate, while 13.6%
(n ¼ 12) of the high materialism respondents indicated that they had such an invest-
ment. While these results are in the hypothesized direction, the differences are not
statistically significant (v2 ¼ 1:9, df ¼ 1, p ¼ 0:17).
In sum, people with low levels of materialism (in comparison to people with high
levels of materialism) are more likely to exhibit some behaviors consistent with positive
attitudes toward saving (e.g., mutual funds). However, the more dramatic differences
between the two groups seem to revolve around attitudes related to saving/spending.

4.4. Hypothesis 3

Hypothesis 3 was designed to examine whether individuals with high levels of ma-
terialism have more favorable attitudes toward borrowing money than individuals
732 J.J. Watson / Journal of Economic Psychology 24 (2003) 723–739

with low levels of materialism. Respondents again were categorized as having high
levels of materialism or low levels of materialism based on a top quarter, bottom
quarter split.
So that each reason for borrowing could be examined individually, Hypothesis 3
was tested using repeated measures ANOVA. Materialism was the factor, and the
series of items about reasons to borrow money (from Blackwell et al., 1975) served
as the dependent measures. The model tested in this analysis was
Xijk ¼ l þ ai þ pkðiÞ þ bj þ abij þ bpjkðiÞ þ
mðijkÞ
where Xijk denotes a measurement on subject k of materialism level i, for reason to
borrow money j; l is the population grand mean of ratings for all of the reasons to
borrow money; ai is the constant, fixed effect of materialism; pkðiÞ is the effect of
subject k nested under i level of materialism; bj is the subject’s within reason to
borrow money j effect; abij is the fixed effect of materialism, subject’s within reason
to borrow money j interaction; bpjkðiÞ is the effect of subject k nested under i level of
materialism level i, subject with reason to borrow money j effect interaction; and

mðijkÞ is the experimental error nested within the individual observation.
The results of the statistical procedure support H3 . There is a between subjects ef-
fect (F ¼ 10:28, df ¼ 1, p ¼ 0:0016), indicating that subjects with high levels of ma-
terialism and subjects with low levels of materialism have different attitudes toward
the long term borrowing of money for the 24 reasons listed in the present study.
Table 2 provides the ANOVA table for the between subjects effects.
The repeated measures analysis also indicated that there was a significant effect
for the dependent measures (Pillai-Bartlett Trace ¼ 0:89, F ð23; 147Þ ¼ 52:15,
p ¼ 0:0001), and the interaction effect between the dependent measures and materi-
alism (Pillai-Bartlett Trace ¼ 0:22, F ð23; 147Þ ¼ 1:78, p ¼ 0:02). The Pillai-Bartlett
Trace is the most robust MANOVA statistic in this instance, when the groups (high
and low materialists) differ along several dimensions (i.e., reasons to borrow money)
(Iacobucci, 1994).
A comparison of the means and standard deviations between subjects with high
levels of materialism and subjects with low levels of materialism is provided in Table
3. Of the 24 reasons to borrow money which were examined, people with high levels
of materialism had significantly more positive attitudes for the following: (1) to buy
home furnishings, (2) to have optional or corrective surgery or dental work, (3) to
buy a recreational vehicle, camper, trailer, or boat, (4) to buy a second or vacation
home, (5) to take a vacation trip, (6) to buy a swimming pool, (7) to take a honey-
moon trip, (8) to stay at a resort, (9) to buy expensive sporting equipment, (10) to

Table 2
Repeated measures ANOVA for the relationship between materialism and reasons for borrowing money
for over 90 days (between subjects effects)
Source df Sum of squares F value p
Materialism 1 70.86 10.28 0.0016
Error 169 1165.23
 J.J. Watson / Journal of Economic Psychology 24 (2003) 723–739 733

Table 3
Reasons for borrowing money for over 90 days
Reason to borrow money Materialism level of respondent Test of differences
for over 90 days High materialism Low materialism
(n ¼ 90) (n ¼ 81)
Mean Std. dev. Mean Std. dev. F value p
Buy a car 4.19 0.86 4.07 0.83 0.57 0.451
Buy land or property for 4.04 0.99 3.95 0.93 0.38 0.538
investment purposes
Buy a house or trailer 4.32 0.83 4.38 0.83 0.16 0.690
Pay medical expenses 3.53 1.06 3.48 1.21 0.12 0.730
Buy home furnishings
3.29 1.05 2.90 1.09 6.48 0.012
Have optional or corrective 3.43 1.02 3.01 1.16 7.64 0.006
surgery or dental work

Go into business for myself 3.88 0.95 3.90 1.00 0.01 0.920
Pay legal bills or a settle- 3.47 0.99 3.48 0.90 0.01 0.920
ment
Pay for an education or 4.08 0.75 4.15 0.71 0.21 0.647
special training for myself
Pay piled up bills 3.24 1.12 2.96 1.13 3.82 0.052
Buy a recreational vehicle, 3.19 1.19 2.51 1.21 20.08 0.000
camper trailer, or boat

Help a relative who needs 3.00 1.05 2.85 1.15 0.95 0.331
money
Buy a second or vacation 2.92 1.14 2.49 1.33 7.91 0.006
home

Cover expenses when 2.89 1.18 2.63 1.04 2.90 0.090
income has been cut
Take a vacation trip
2.37 1.04 1.99 0.92 6.19 0.014
Buy a swimming pool
2.42 1.14 1.91 0.98 11.15 0.001
Take a honeymoon trip
2.73 1.18 2.22 1.00 11.26 0.001
Buy stocks or bonds 2.42 0.97 2.27 0.92 0.98 0.324
Stay at a resort
2.23 0.97 1.74 0.70 10.46 0.002
Buy expensive sporting 2.07 0.92 1.57 0.70 10.72 0.001
equipment

Buy furs or jewelry
1.99 0.94 1.49 0.69 10.56 0.001
Invest in art or other 2.27 0.95 1.93 0.92 5.00 0.027
collectibles

Put my children through 4.19 0.83 4.09 0.82 0.45 0.503
college or technical school
Invest in precious metals 2.09 0.82 1.96 0.94 0.68 0.411
*
Significant differences in the mean response for high materialism and low materialism respondents.

buy furs or jewelry, and (11) to invest in art or other collectibles. Although few dif-
ferences were evident for product categories that could be called necessities (e.g., au-
tomobile, house, medical expenses, education), the data suggest that people with
high levels of materialism have more favorable attitudes toward borrowing money
to make luxury purchases (e.g., a boat, swimming pool, jewelry). With the excep-
tion of the first two reasons listed – home furnishings and optional or corrective
734 J.J. Watson / Journal of Economic Psychology 24 (2003) 723–739

surgery or dental work – many people would consider these reasons to be discre-
tionary or luxury purchases that could fall under the rubric of conspicuous consump-
tion.

4.5. Hypothesis 4

For Hypothesis 4 it was predicted that in comparison to people with low levels of
materialism, people with high levels of materialism are more likely to (a) use install-
ment credit, (b) have more credit cards, and (c) have loans more than $1000. Three
tests were used to examine H4a . First, a chi-square test was conducted to determine if
there were differences in the percentage of people with high levels of materialism and
the percentage of people with low levels of materialism who had credit card balances
greater than $200 in the previous month. Second, a chi-square analysis tested
whether there were differences in the percentage of people with high levels of mate-
rialism and the percentage of people with low levels of materialism who pay finance
charges on specific credit cards (e.g., Visa, Mastercard). Finally, an ANOVA was
conducted to determine if the total credit card balances owed (dollar amount) from
the previous month differed for individuals from the two groups.
In general, the results of these tests support H4a . Respondents with high levels of
materialism were significantly more likely to have had credit card balances greater
than $200 in the previous month; 50% (n ¼ 45) of the respondents with high levels
of materialism versus 33% (n ¼ 28) of the low materialism respondents had credit
card balances greater than $200 (v2 ¼ 5:5, df ¼ 1, p ¼ 0:019).
Also, subjects with high levels of materialism were more likely to pay finance
charges on Visa [46.1% (n ¼ 41) of high materialism paid finance charges on their
Visa the previous month versus 29.4% (n ¼ 25) of the low materialism respondents;
v2 ¼ 5:9, df ¼ 1, p ¼ 0:015], Mastercard [31.5% (n ¼ 28) high materialism versus
13.6% (n ¼ 12) low materialism; v2 ¼ 8:0, df ¼ 1, p ¼ 0:005], and department or spe-
cialty store credit cards [29.5% (n ¼ 26) high materialism versus 14.8% (n ¼ 13) low
materialism; v2 ¼ 5:6, df ¼ 1, p ¼ 0:018].
The final test of H4a examined the total credit card balances for people with high
levels of materialism and people with low levels of materialism. Although subjects
with high levels of materialism were more likely to use installment credit than sub-
jects with low levels of materialism, the total balances outstanding on their credit
cards were not significantly different. Subjects with high levels of materialism
(n ¼ 38) reported an average balance of $3456 on their credit cards (std. dev. ¼
$3259) while subjects with low levels of materialism (n ¼ 27) reported an average
balance of $3272 (std. dev. ¼ $3536) (F ð1; 63Þ ¼ 05, p ¼ 0:83).
In general, the results of Hypothesis 4a indicate that people with high levels of
materialism are more likely to use installment credit even though their total balances
outstanding were not significantly different from people with low levels of material-
ism. Although levels of materialism did not explain differences in the total amount
people owed on their credit cards, it should be noted that there was a great deal
of variability in the total credit card balances consumers reported, and the differences
found were in the hypothesized directions.
 J.J. Watson / Journal of Economic Psychology 24 (2003) 723–739 735

Hypothesis 4b predicted that individuals with high levels of materialism would

have more credit cards than individuals with low levels of materialism. This hypoth-
esis was supported. Significant differences were found for the total number of Mas-
tercard and Visa credit cards possessed by subjects with high levels of materialism in
comparison to subjects with low levels of materialism (t ¼ 2:68, p ¼ 0:008). Individ-
uals with high levels of materialism (n ¼ 90) possessed 1.93 (std. dev. ¼ 1.65) Master-
card and Visa cards on average, while individuals with low levels of materialism
(n ¼ 87) only possessed 1.39 (std. dev. ¼ 0.94) cards on average.
Finally, chi-square tests of proportions were used to examine whether respondents
had loans of more than $1000 (excluding home equity loans and mortgages), a test of
H4c . This hypothesis was supported; 54% (n ¼ 48) of the high materialism respon-
dents indicated that they had loans over $1000, while only 37.9% (n ¼ 34) of the
low materialism respondents indicated the same (v2 ¼ 4:5, df ¼ 1, p ¼ 0:033).
In sum, people with high levels of materialism (in comparison to people with low
levels of materialism) are more likely to exhibit behaviors consistent with positive at-
titudes toward debt – use of installment credit and outstanding debt.

5. Discussion

The objective of this study was to examine how people with differing levels of ma-
terialism vary in their propensity to spend and/or save and their attitudes and behav-
iors toward borrowing money. The findings suggest that there is a positive
relationship between materialism and the tendency to spend, although this relation-
ship seems to be strongest with respect to attitudes toward spending rather than ac-
tual spending/saving behavior. In addition, highly materialistic respondents had
more favorable attitudes toward borrowing money (particularly for luxury pur-
chases), and were more likely to use installment credit and have loans of more than
$1000. In contrast, people with low levels of materialism were more likely to invest in
stocks or bonds and have mutual funds. In sum, the data from this study support
characterizations of people with high levels of materialism as spenders and people
with low levels of materialism as savers. So what does this mean?
One of the more interesting findings from the study relates to the fact that highly
materialistic individuals appear to have more favorable attitudes toward borrowing
money for a wider variety of reasons, particularly reasons that could be construed as
‘‘non-essential’’. Such attitudes could have quite a significant impact on individual
financial management. It is already quite easy to obtain credit limits that are well
in excess of a person’s annual income; there are university students who currently
have earnings well under $10,000 a year yet have credit card debts in excess of
$15,000. While this situation may indicate poor financial planning on the part of
the individual, it also represents negligence or questionable ethical activity by some
credit card companies, and such situations play a role in the increased number of
bankruptcies that are declared every year. In Canada, the absolute number of per-
sonal bankruptcies has risen by a factor of eight between 1977 and 1997 (Industry
Canada, 1998). As Lynch and Royal (1998) note, individual mismanagement of
736 J.J. Watson / Journal of Economic Psychology 24 (2003) 723–739

money has resulted in over 1.4 million American consumers filing for bankruptcy in
1997, with numbers projected to exceed 2.2 million by 2001. As consumer attitudes
toward debt become more relaxed and as the bankruptcy’s negative stigma continues
to diminish, more and more consumers will find themselves in precarious financial
positions. Weller (1997) even suggests that consumers are now more aware of bank-
ruptcy as a financial safety valve, and the concept is now associated with a certain
amount of respectability. Individual mismanagement of money is clearly becoming
an important social issue.
As the consumption ethos becomes more ingrained in society, the importance of
saving is pushed further and further into the background as well. In addition to the
problems of bankruptcy, the consumption ethic has other long-term implications,
particularly with respect to financial independence during old age. If individuals
have no savings when they retire, who will take care of them when they are no longer
earning any money? In Singapore it is the responsibility of the person’s children; in
New Zealand it is the responsibility of the state. Both are reasonable solutions, but
as more and more retired individuals require greater levels of support, it is something
that we should at least consider.
Some people have argued that the key to combating financial illiteracy and by ex-
tension such problems as personal bankruptcy is through consumer education (cf.
McDonnell, 1997). But one has to wonder if education alone will be enough. Con-
sumers are quite clearly not ‘‘rational decision makers’’. Do they work out the
long-term implications of their actions? Will a multimillion dollar public service/
education campaign be able to combat the vast efforts of marketers trying to con-
vince people that Product X is essential to their lives and will solve all of their prob-
lems? In today’s culture of easily accessible credit, Keynes ideas of saving are quickly
becoming outdated. The factors corresponding to spending seem to override all of
factors related to saving. Yet what can be done?
Although the associations between high levels of materialism and spending, and
low levels of materialism and saving are supported by the data from the present
study, the overall role that materialism plays in individual financial management
(relative to other variables) is still unknown. For example, the study herein supports
the proposition that people with high levels of materialism are more likely to use in-
stallment credit. However, there are a number of additional variables that also
explain some of the variability of credit card usage – variables such as socioeconomic
status (Matthews & Slocum, 1969, 1972), demographic characteristics (Srivastava,
Alpert, & Shocker, 1984; Lunt & Livingstone, 1992), and consumer attitudes
(Awh & Waters, 1974; Livingstone & Lunt, 1993). By incorporating demographic
variables such as age and income, and other context specific variables (e.g., whether
a person has children when attitudes toward college loans are assessed), as well as a
measure of materialism in models of installment debt, it would be possible to provide
a clearer conceptualization of the roles each plays in individual financial manage-
ment. Some preliminary work has already shown that materialism may not be a sig-
nificant predictor of indebtedness when these variables are included in the analysis
(Watson, 1998). To totally disparage consumption and materialism, therefore, seems
ill advised. Furthering that point, the introduction of this article mentioned that if
 J.J. Watson / Journal of Economic Psychology 24 (2003) 723–739 737

individuals do not consume or consume at reasonable levels, the economy will

quickly go into a tailspin. The issue then becomes one of balance: what is the proper
balance between spending and saving that will allow us to continue to thrive eco-
nomically as well as allow us to maintain the high standard of living we currently
enjoy? Can we possibly manipulate this balance in the marketplace so that we main-
tain a stable macroeconomic environment while maintaining a quality of life that is
desired at the microeconomic level? It is not an easy question to answer, but the im-
portant questions never are.

Appendix A. Behavioral measures for spending and saving

The following behavioral measures spending and saving were derived from the in-
strument used by Mitchell (1983).

Yes/No responses
Do you have an individual retirement account (IRA)?
Do you have any stocks or bonds?
Do you have any mutual funds?
Do you own any investment real estate, such as a vacation home, apartment or
rental property, commercial building, farm, ranch, or undeveloped land?
Do you have any loans (other than your home mortgage/home equity), checking
overdrafts, or margin accounts on which the total owed is more than $1000?
Do you have credit card balances totaling more than $200 on which you are pay-
ing a finance charge?
Open-ended questions
What is the total amount of all the credit card balances on which you are paying
finance charges?
How many Visa card accounts do you have?
How many Mastercard accounts do you have?
Other format
On which credit cards did you pay finance charges last month? (circle all that
apply) Visa, Mastercard, Department or specialty store.

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