Picture courtesy Joseph Montanaro Real Estate

People who live in affluent areas are more likely to spend compulsively and are less likely to save, according to a new study.

They are more likely to have materialistic values and bad spending habits, particularly if they are young and are relatively poor compared with their surroundings.

The reason, says Associate Professor of Psychology Ryan Howell, may have to do with “relative deprivation,” or the feeling someone gets when they believe they are less well-off than those around them.

The study, by the San Francisco State University and published in the Journal of Consumer Culture, is the first to show a connection between neighbourhood socioeconomic status and materialism.

The researchers gather some of their data through the Materialistic Values Scale test at their website, BeyondThePurchase.Org. The site gives immediate feedback including a score on the UK Happiness Index.

If someone is bombarded with reminders of wealth, such as an abundance of luxury cars and large homes, they are more likely to spend money they don’t have to project a false image of wealth.

“People who live in more affluent areas are vulnerable to this implicit social comparison, where you start to see other people spending a lot of money,” Howell said.

“Because you feel the need to live up to that standard, you end up impulsively buying material items, even though they don’t actually make you happier.”

To conduct the study, researchers determined a suburb’s socioeconomic status by looking at its per-capita income and poverty rate as well as the number of financial institutions present.

That information was compared with survey data measuring materialistic values, views about money and spending and savings habits.

After controlling for age, gender and individual socioeconomic status, researchers found residents of wealthier suburbs were likelier to be materialistic, spend compulsively and manage their money poorly than those living in less well-off areas.

The effect was seen especially in younger people, who Howell said tend to be more materialistic in general, and those whose individual socioeconomic status is lower than their neighbourhood’s.

Conversely, someone with a high individual socioeconomic status was less susceptible to such behaviour. They know how to hold on to their money.

“We did find that individual socioeconomic status is negatively correlated with materialism, so the more money you have for yourself, the less materialistic you are,” said Jia Wei Zhang, lead author of the study.

“But it doesn’t fully negate the effect of a wealthy neighbourhood. Regardless of how much someone is worth in general, the richer their neighbourhood, the more likely they are to be materialistic, independent of their own socioeconomic status.”

The next step in the research is to explore whether there are ways to counter a suburb’s effect on a person’s materialistic values.

“There are policy implications to all of this,” Zhang said. “Putting up billboards that flash materialism and wealth all over the place has an impact on people’s value system. So we need to better understand the phenomenon, learn how far it extends, and how we can prevent it from happening.”

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