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Case Study

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The Psychology of Small Purchases: Emotional Spending and Financial Behavior Among Young Adults

 

Abstract:

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This paper explores how young adults perceive and react to small discretionary purchases, such as spending $6 on non-essentials. Drawing on survey responses from 50+ participants aged under 14 to 22+, this research analyzes how emotions like guilt, regret, and joy interact with financial literacy and decision-making. Findings reveal a clear psychological divide: while some justify small indulgences, others express concern about their cumulative impact. The study situates these findings within the framework of behavioral economics, particularly focusing on concepts like mental accounting, moral licensing, and delayed gratification.

 

Introduction

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In the age of instant gratification and contactless payments, small purchases have become near-invisible financial decisions—often escaping conscious evaluation. But do these “little” choices carry more weight than we assume? This paper investigates how people emotionally and cognitively relate to small expenses, particularly in the context of their financial literacy and long-term habits.

Understanding how people react to a $6 non-essential purchase, such as coffee, insurance, or a digital upgrade, offers insight into broader patterns of financial behavior and self-regulation. By examining real responses across various age groups and genders, this research contributes to the field of behavioral economics and financial psychology.

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Methodology

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Participants (n = 40) responded to a Google Form survey on May 2, 2025. Ages ranged from “Under 14” to “22+,” with a mix of gender identities represented. The survey measured:

 

  • Self-rated financial literacy (1 = None to 5 = Expert)

 

  • Emotional reaction to a small, non-essential purchase

 

  • Likelihood of guilt after such spending (scale of 1–5)

 

  • Behavioral tendencies with an unexpected $100

 

  • Reactions to financial incentives and optional fees (e.g., insurance)

 

  • Personal philosophies on how small purchases affect money mindset

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Results and Analysis

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Financial Knowledge vs. Emotional Guilt

Despite variation in self-assessed financial literacy, guilt was a dominant emotion. For instance:

  • One 22+ male who rated himself a “5” in financial knowledge reported the highest level of guilt (5) and stated: “It makes me lose discipline.”

  • Conversely, an under-14 female who rated herself a “1” expressed justification and indifference, echoing: “no way” when asked to elaborate.

This indicates that financial knowledge doesn’t necessarily reduce emotional responses—it may even heighten them, due to increased awareness of long-term impact.

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The Dominance of Guilt and Regret

Across responses, guilt was the most common emotional association, followed by regret, especially among females aged 15–21. The phrase “I could’ve spent that money on something more important” appeared repeatedly in different forms.

This pattern supports the behavioral economics principle of loss aversion: people experience the pain of losing money (even in small amounts) more intensely than the pleasure of gaining or spending it. (Sediyama et al., 2020)

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How $100 Would Be Spent

Participants’ choices with $100 extra reflect broader financial personalities:

  • Risk-takers opted for “try a trending but volatile crypto.”

  • Disciplined savers chose “invest in a stable index fund” or “save it in a high-yield account.”

  • Spenders picked “buy something to reward myself.”

Interestingly, many who felt guilty over small purchases still chose to reward themselves with $100—revealing a cognitive dissonance between intentions and impulses.

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Moral Licensing & Purchase Insurance

The optional $6 insurance question served as a moral licensing proxy. Those who declined insurance often explained it with logic like, “I’d rather save money,” but others said, “Depends on my mood,” revealing how emotional state overrides logic.

This supports the mood congruence effect, where people make spending decisions aligned with their emotional state—even when aware of better alternatives. (Faul & LaBar, 2022)

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Qualitative Reflections

Participants wrote striking insights:

  • “Small purchases dull the sense of control over finances.”

  • “They create a habit of spontaneous spending.”

  • “Small expenses, if repeated, become a big financial issue.”

  • “I work 1.5 months a year just for cigarettes.”

Such reflections show growing meta-cognition in Gen Z and Gen Alpha—awareness not only of financial behaviors, but also of why they make them. (Metacognition | Teaching + Learning Lab, n.d.)

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Discussion

The tension between financial knowledge and emotional behavior mirrors key theories in behavioral finance:

  • Mental Accounting (Thaler, 1985): People treat money differently based on its source or purpose. A $6 coffee feels "harmless" if framed as leisure.

  • Moral Licensing (Tackling Moral Self-Licensing (SSIR), n.d.) : After saving or earning, individuals may “reward” themselves with poor financial choices—seen in responses to the $100 question.

  • Hyperbolic Discounting (Laibson, 1997): Some participants valued immediate gratification over long-term goals, especially when they mentioned “depends on my mood.”

Despite these cognitive biases, many participants showed early signs of financial self-regulation. Their ability to reflect, justify, and critique their own habits suggests that with education and tools, these behaviors can be redirected toward better long-term outcomes.

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Conclusion

This study sheds light on an overlooked yet deeply human aspect of behavioral finance: the emotional aftermath of spending. The data reveals that guilt is not a rare side effect of impulsive purchases—it is a consistent emotional response, particularly among younger participants with higher self-reported financial literacy. This paradox suggests that knowledge alone may not inoculate individuals against regret, and may even heighten emotional consequences due to higher expectations of “rational” behavior.

The consistency of emotional responses across age and gender points to a universal psychological cost in financial decision-making that cannot be ignored. While traditional economic models emphasize logic and utility, our findings reinforce the necessity of integrating emotional variables—such as guilt, self-worth, and moral licensing—into these frameworks.

Implication: Financial education for young people must address not only budgeting and investing, but also emotions, mental habits, and impulse control. Just as we teach the science of money, we must also teach its psychology.

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References

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