Aflatoun International – Child Social and Financial Education

Beyond the first buy: Another financial skill to manage the spiral of spending!

I often hear people ask about a particular spending dilemma they face. They share how they generally follow good financial habits, diligently saving and spending wisely. However, they feel puzzled and helpless when they notice a strange spending tendency: whenever they buy something new, this singular purchase leads them down an unexpected path of acquiring more related items, disrupting their financial discipline, and saving. This common scenario, intriguing yet challenging, reflects a deeper psychological pattern that many of us unwittingly fall into.

It all started with just one screen protector: A few months back, I particularly noticed such behaviour in my son Abdullah. Abdullah, an 18-year-old accounting student, has been managing an online store selling leather wallets, a venture he started when he was just 15. As his mother, I’ve always been immensely proud of him, not only for his extraordinary academic performance, and his entrepreneurial spirit but also for his sensible financial habits.

However, something changed when I gave him a new smartphone. It was meant to be a token of appreciation for his hard work and dedication, both in his studies and his business.

The gift, a significant upgrade from his old phone, did not include a screen protector. Abdullah decided to purchase a simple screen protector for it. But upon returning home, he realised his old charger looked out of place with the new phone’s sleek design. The next day, he bought a new charger to match.

While enjoying music on his new phone, he thought about enhancing the experience with a set of high-quality headphones. He quickly found and purchased the perfect pair online. During this process, he came across an advertisement for a stylish box to protect his new headphones and impulsively added it to his cart. And it continued for a couple of other related purchases.

As a result, for the first time in the last three years, my son approached me for pocket money, indicating that the recent series of purchases had led him to exhaust his monthly income and savings.

It all started with a phone and a thought, “Just one screen protector,” but it didn’t stop there. Abdullah’s buying behaviour resembles that of many of us and what happened to a man named Denis Diderot in the 18th century, the philosopher who first talked about the spiral of buying.

He got a new dressing gown and then felt like all his other stuff looked shabby next to it, so he started replacing them, piece by piece. This behaviour— where one purchase pulls you into the next—is what we call the Diderot Effect.

Let’s understand the key aspects of the Diderot Effect, a phenomenon that slightly yet powerfully influences our spending habits.

  • Trigger point: The Diderot Effect usually begins with a significant purchase that marks a lifestyle upgrade, like buying a luxurious item or a new home. In the case of Abdullah, his new phone is the trigger.
  • Desire for consistency: Acquiring a new item often leads to a feeling that one’s current possessions or lifestyle don’t match the new standard, prompting further purchases to create harmony. In Abdullah’s case, after getting his new phone, he feels that his old phone accessories do not match the new phone.
  • Spiral of consumption: The initial purchase sets a higher standard, leading to a chain of buying more items to maintain this new level, often exceeding needs, and budget. In Abdullah’s case, each new purchase that he makes for his phone leads to another. A single purchase for his new phone leads to high-end headphones, then to a fancy storage box for the headphones.
  • Emotional and psychological factors: This effect is linked to how people emotionally connect with their possessions and how these affect their self-identity, driving further purchases to sustain this enhanced self-image. In Abdullah’s case, he feels a sense of pride and uplifted identity with his new phone, and each purchase is partly motivated by how it makes him feel about himself.
  • Impact on financial health: The Diderot Effect can lead to significant financial implications, as emotional and unplanned spending may result in expenditures beyond one’s financial capacity. In Abdullah’s case, each purchase, though small on its own, adds up, straining his financial resources.

James Clear’s also mentions about Diderot effect in his book Atomic Habits; a resource worth exploring for anyone on this journey.

So, how could my son, individuals like Diderot, or any of us avoid such a buying spiral?

To prevent my son from falling into this trap again, I drew upon strategies that we, at Aflatoun, use in our Financial Education curricula to tackle and halt the Diderot Effect for various age groups.

Here are some quick tips that proved to be very effective for him:

    1. Give It 24 Hours: Feel the urge to buy? wait until the next day. If you still want it, then think about buying it.
    2. Budget for non-essentials: Allocate a specific portion of your budget for discretionary spending. This helps in controlling impulsive purchases while still allowing for some flexibility.
    3. Make the purchase difficult: To counter impulsive buying, set personal rules like buying a gift for a family member for every personal purchase (if this purchase is a “want”), or doing a physical challenge like running or fasting before buying. These hurdles give you pause and help curb spontaneous spending in many ways.
    4. Inventory Check: Regularly review what you already own. This can reduce the urge to buy new things and make you more aware of your existing resources.
    5. Remember how you are earning: Before any new purchase, think about the hard work and sacrifices made to earn your money. Ask yourself, “Does this purchase really justify the effort I put into earning this amount?” Remembering the effort behind your earnings can help you make more thoughtful spending decisions.
    6. Remember what you’re saving for: Keep a picture of what you’re saving up for, like a car or a trip, where you can see it. It’ll help you think twice about spending on items which you don’t need.
    7. Ask yourself hard questions:
      1. Do I really need this? Why?
      2. What happened to my previous such purchases?
      3. What if this trend quickly becomes outdated?
      4. Does it help me with my goals?
    8. Embrace Minimalism: Focus on simplicity and essentials in your lifestyle and purchases. This can shift your mindset from accumulation to appreciation of what you already have.
    9. Avoid Temptation: Blocking and unsubscribing from marketing sites and limiting exposure to advertisements can reduce the temptation to buy new things.
    10. Remember Denis Diderot: Educate Yourself on consumer psychology – understanding the psychological tricks used in marketing and advertising can make you more resistant to them. Specifically, being aware of the Diderot Effect and understanding how it works can make us all more conscious of buying decisions and resist the urge to make related purchases.
    11. Seek Aflatoun’s support: If you often struggle with the Diderot effect or are dedicated to educating and guiding children and youth yet find it challenging, remember that help is available. Aflatoun, with its global collaborations with more than 300 partner organisations in over 100 countries, is dedicated to guiding young people, children, and even adults in developing wiser financial habits.

The Diderot Effect underscores the need for knowledge and skill to understand consumer psychology to develop smart financial habits and keep these updated to navigate the evolving marketplace tactics. Aflatoun’s programs strive to instil such understanding from an early age, fostering a generation that can distinguish between wants and needs and make informed financial decisions.

Let’s remember that financial habits are just that — habits.

These CAN be changed, shaped, and improved.

 

Written by Zunara Nauman

Zunara Nauman is a training and development professional currently serving as a consultant Education Specialist for Aflatoun International. With her expertise in design and developing learning solutions and experiences, and curriculum development, Zunara plays a pivotal role in enhancing Aflatoun’s mission of empowering children and young adults through social and financial literacy training. Her work involves creating engaging and impactful educational content, contributing significantly to the organisation’s efforts in empowering future generations through innovative and effective educational strategies.

Zunara Nauman specialises in youth development & empowerment through entrepreneurship and financial skills, and Technical and Vocational Education and Training (TVET), with a focus on digitising academic courses. She excels in creating engaging digital learning experiences, utilising e-learning authoring tools, simulations, gamification, and extended reality (XR). Her expertise also includes managing Learning Management Systems and instructional design, ensuring impactful and immersive educational content.

With more than 15 years of experience with international organisations and UN agencies, her work follows a systematic approach to analyse and apply the most appropriate and contextualised learning theories, strategies, methodologies, and technologies to maximise the desired learning outcomes and knowledge transfer.