You probably spent an hour or two with your friend today; be it for lunch or just for a cup of coffee; and they might have already influenced how you spent your money.
It can’t be denied that we are all living in a materialistic world, whereby you are judged from how you dress and how much you have to spend. If you think about it, you will notice how much friends do influence your spending habits.
Relying on Social Proof
You may have noticed that sometimes, the act of a friend buying something helps you justify spending money as well. How often have you found yourself asking your friend “Aren’t you getting anything?” The act helps us validate our spending. This is known as social proof; a principle which relies on the sense of “safety in numbers”.
This feeling influences our spending because it helps give us an assurance when we are purchasing something that we are doing something socially acceptable. For instance, it is a hot day and you feel like purchasing that tantalising, yummy ice-cream but you’re torn between that and a cold refreshing Coke. Your friend, however, without hesitation purchases the ice-cream which ultimately helps you to decide to purchase the ice cream as well.
An Issue of Trust
Such a situation is also relatable to the level of trust we share with our friends. Since the friend purchased the ice cream, it serves as assurance that it would be ‘safer’ to purchase the ice cream. This is because of the trust we have in friends and the “safety in numbers” principle.
It would seem that for many, trust and comfort given by our friends might actually rank higher in importance than the price of the item itself. “I was out shopping for a jacket for winter in Australia with two of my friends and it came down to two choices. One had a hefty price tag of AUD600 whereas the other was only selling for AUD189. I was leaning towards the latter because purchasing the AUD600 jacket would mean I’d be broke for a month. However, after much persuasion and opinions given by my friends, I purchased the AUD600 jacket anyway,” said Chua Khoon Theng, a Malaysian student studying in Melbourne.
We are more susceptible to being influenced by friends while we’re out spending because such peers provide needed information in purchasing the item or because friends can reward desirable behavior and help teens to construct positive self-identities.
Asked about whether he regretted blowing his budget for the jacket, Khoon Theng said: “Nope, not at all. I did suffer a little with the lack of money thereafter but with the compliments on how I looked and how it was a good buy, I think I made the right decision!”
Balancing peer pressure
Another reason how your friends are able to influence your spending habits is because we all long in creating or establishing our identity as a person or group. We tend to shy away from purchasing items that our friends would deem “uncool” or “ugly” just so we could fit in the group’s identity. Hence, over the years, our spending habits are slowly shaped into what they are today; helping to mould your your identity.
Of course, there are always exceptions to the rule but for many; social acceptance plays a large role in how they spend money. The problems actually arise when such peer pressure causes the person to spend more than he can afford. As such it is important, especially for teens and those at impressionable ages, to be fed a healthy dose of confidence to make choices based on their own deductions. Although there will always be a small amount of influence, the key is ensuring it is healthy.
*Picture courtesy of Jay Black at Wikimedia Commons.
This article brought to you by Matthias Sim of RinggitPlus.com. We believe all Malaysians should have access to free, accurate and independent personal finance information.