Understanding and Use of Money among Children - Essay Example

Understanding and Use of Money among Children of the of the Table of Contents Table of Contents 2 Introduction 3 Discussion 3 Conclusion 9 References 10 Introduction In last 40 years, significant amount of research works have been conducted in order to highlight importance of economic socialization in context to psychological dimensions of children (Zollinger, 2004). Literature regarding economic socialization of children mainly focuses on two issues, 1- understanding and use of money among children and 2- problems being faced by children regarding understanding the importance of money. Zollinger (2004) pointed out that psychology of economic socialization plays important role for marketers to adjust advertising policy or product strategy targeted exclusively for children. In this paper, the researcher will focus on addressing above mentioned two issues in order to understand importance of economic socialization among children. As part of research objective, the paper will also identify some of the most important problems the developing child has to solve in his or her understanding and use of money. Discussion Almost 30 years ago, in the seminal research work, Leiser (1983) pointed out that development of complex cognitive structures for understanding importance of money among children are being composed of two process. In first process, children develop substructures at cost of distorting the alignment of cognitive element and in second process; children integrate distorted substructures in order to develop overall idea for importance of money. In simple term, children understand the importance of money through series of cognitive process while external reference points like parents; previous experiences etc help the children in the cognitive process of understanding importance of money. In such context, Valkenburg & Cantor (2001) stated that the concept of ‘child consumer’ is being linked with the understanding importance of money among children. From marketer perspective, child consumers are important for three reasons such as, 1- children in middle or higher income families have sufficient access to money that can be used by them to meet their wants and needs, 2- children develop brand loyalty during early years and 3- children have the power to influence purchasing decision of families. These three conditions are either directly or indirectly linked with psychology of economic socialization among children. Ability of marketers to influence consumption decision of children is being directed by the fact whether the child understand the importance of money or not. Therefore, Valkenburg & Cantor (2001) suggested that further research is needed in order to understand how children perceive money or understand importance of money. Consideration of research works of Banister & Booth (2005) reveals the fact that children develop their understanding of money through social interaction with parents or immediate peer group, experiencing and observing consumption behaviour of family members and accessing external money related information from mass media. Well, a child in the age group of 0 years to 5 years might not be able to access mass media information but they can still develop understanding of money through social interaction and observation of consumption behaviour of family members. Beutler & Dickson (2008) argued that understanding importance of money among children is fragmented due to many reasons such as, lack of cognitive capability of children to verify authenticity of information, diversity in observation of consumption behaviour of family members etc. On the other hand, Elliot, Webley & Friedline (2011) found significant amount of variance in impact economic socialization on adult and children. Therefore, it can be said that understanding about importance and spending of money changes across different age groups. Chaplin and Lowrey (2009) used the concept ‘consumption constellation’ in order to identify set of complementary products that can influence money spending among children. Elliot, Webley & Friedline (2011) also found that children put more attention while spending money on certain merchandises while there are products which create price dilemma among children. Otto (2009) conducted exploratory study in order to understand money spending pattern of developing child and adolescent. During the age of 0 years to 12 years, parents provide pocket money and ‘entitled’ allowance to children and eligibility of accessing pocket money for children is not being restricted to complying rules or following house norms. Parents give such pocket money and ‘entitled’ allowance to children in order to show their affection and love. Nyhus & Webley (2001) pointed out that concept of pocket money is being blended with trust between parent and child while existence of such trust factor increases efficiency of economic socialization. Transaction of money between children and parents is being directed by rules of social universe rather that economic outcomes (Ashby, Schoon & Webley, 2011; Bernheim, Garrett & Maki, 2001). As a result, importance of economic socialization gets increased for children while deriving the importance of a substance (money in this case) that is being earned without any effort. Lewis and Scott (2000) found that understanding about value of the money or buying capacity of the money gets increased among children with increase in their access to money sources. For example, Lewis and Scott (2000) found that adolescents who receive entitled’ allowance from their parents regularly develop certain level of interest on different aspects of money such as interest rates, actual price of consumer goods, capacity of buying products through use of money etc. On contrary, Bernheim, Garrett & Maki (2001) argued that getting pocket money in regular interval does not guaranty that the developing child can solve problems regarding understanding importance of money and use the money in most efficient manner. Regular access to monetary allowances might increase awareness of the child regarding use of money but that does not optimize how the child can utilize the money or save money for future (Webley & Nyhus, 2006). Arguments of Webley & Nyhus (2006) regarding problems for children in understanding and using of money is being supported by Beutler & Dickson’s (2008) judgement that understanding importance of money among children is fragmented due to lack of experience in money handling, lack of cognitive capability, lack of social exposure to understand intention of people, diversity in observation of consumption behaviour of family members etc. Van Oorschot (2006) used historical contexts to understand problems regarding psychology of economic socialization among children. Although, Van Oorschot’s (2006) work explains the historical context of economic socialization among children but the scholars remained silent when it comes to identifying most important problems the developing child has to solve in his or her understanding and use of money. In such context, Leiser (1983) conducted exploratory study in order to understand problems and factors that create perplexity in understanding importance of money. Mauro & Harris (2000) and Leiser (1983) found some common problems regarding use of money among children such as, vague idea about price of merchandises, ambiguity regarding fair-exchange conception, lack of idea regarding economic consequences of spending money and becoming vulnerable to marketing activities of marketers. Price of merchandises- developing child or adolescent does not have sufficient knowledge integration to economy in order to test validity of the price being mentioned by seller. For example, in exploratory study of Leiser (1983), a nine year old boy showed complete perplexity when it comes to justify price being paid by him to buy a product from seller. In the same study, most of the children said that they do not know why price product goes up or down. Schor (2004) found similar result that children face problem in estimating value of the money they holding and they are vulnerable to overestimated price being mentioned by sellers. According to Schor (2004), children even face problem in understanding true worth of their money. In most cases, due to lack of exposure to external world, children fail to optimize their money spending and ended up spending extra money on purchasing unnecessary items. Fair-exchange conception- Leiser (1983) stated that children face problem regarding fair-exchange of money against goods being purchased. For example, in exploratory study of Leiser (1983), most of the children failed to explain what they meant by value of money. For them, it is duty of seller to sell amount of product that is equal to amount of money being spent. Under such assumption, there is no room for profit for sellers because children perceive sellers as just middle man who is responsible for transferring of goods. Obviously such assumption is wrong but such wrong assumption makes it difficult to judge actual worth of their money. Leiser (1983) found that children face problems in judging monetary value of separate elements rather due to lack of cognitive ability, they tend to sum up value of goods. From economic perspective, summation of monetary values eradicates scope for children to justify price being paid for individual product items. Economic consequences of spending money- Zollinger (2004) and Leiser (1983) found that children may have knowledge about purchase capacity of certain amount money but in most cases, they find it difficult to understand economic consequence of money spending. For example, in exploratory study of Leiser (1983), children were not sure how the purchased material can benefit them in long term or even it would be right for them to save money. 60% of children were not aware with concept of saving money and not even justify their purchase decision. Zollinger (2004) argued that during the age of 0years to 12 years, cognitive ability of children to understand economic consequences of spending money is not being developed properly. Therefore, they often go by impulse or personal likings while spending money. Marketers tend to use such mentality of children to lure them to carefully crafted advertisement or other marketing activities. Consideration of research works of Leiser (1983) reveals the fact that lack of knowledge about economic consequences of spending money among developing child is being directed by factors such as lack of exposure to external world, lack of cognitive ability to justify choices, relying more on impulses rather than fact driven consequences, bringing up in protective environment of family and having money that are being gifted by parents. A developing child has to come out of their comfort zone and use external knowledge stimuli in order to understand consequences of using the money. Vulnerable to marketing activities- Valkenburg & Cantor (2001) divided infants and children into different age groups such as infants and toddlers (age 0years to 2years), preschoolers (age 2years to 5years), early elementary school (age 5years to 8years) and later elementary school (age 8years to 12years). Each of this group of children has different set of cognitive process, preferences and exposure to knowledge stimulate. However, Valkenburg & Cantor (2001) found that most of the children in different groups are pretty responsive towards colour scheme, entertainment mode, jungles, celebrity endorsement etc in the advertisement. For example, according to research results of Valkenburg & Cantor (2001), children up to 2 years of age show distinctive preference for objects, colours and sounds being used in advertisements. However, behaviour of children towards advertisement is being directed by reactive impulses rather than true intentional preferences. Marketers tend to exploit such reactive impulse driven advertisement preference of children for influencing children to demand for particular brand. For example, as the children become vulnerable to colour usage, impulse direction and object characteristics in advertisement, fast food markets use such elements in advertisement in order to engage child consumer (Zollinger, 2004). As a result, children end up spending money on purchasing redundant products because marketer of the product created pseudo value statement through the advertisement. From ethical advertisement perspective, this being a serious problem for developing child when it comes to spending money on products being advertised in deceptive manner. In such context, parents need to take care of impulsive demands of children and advise developing child to spend money of products that are being truly useful. Conclusion It is evident from the above discussion that developing child or infant face multitude of problems in his or her understanding and use of money. In most of the cases, lack of cognitive ability to derive true potential of money creates actual problem for children. However, the study has identified four important problems that are being directed by lack of cognitive ability of children such as not justifying price being paid, not understanding economic consequences of spending money, ambiguity in fair-exchange conception and becoming vulnerable to marketing activities. In conclusion, it can be said that developing child needs to rely on external knowledge stimuli and advise of family members in order to address the mentioned problems efficiently. References Ashby, J. S., Schoon, I., & Webley, P. (2011). Save now save later? Linkages between saving behavior in adolescence and adulthood. European Psychologist, 16, 227-237. Banister, E. N., & Booth, G. J. (2005). 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