The best way to deal with clothing competition in schools is to make every student wear uniforms. This is done almost everywhere in the world except largely in the U.S.
Uniforms put the focus on equality and education, taking it away from what a person wears.
In the meantime, if you child goes to a non-uniform school, respect their desire to look good, but help them to put peer pressure in perspective. Be a good example of style, impeccable grooming, and staying modern, so your kids respect your fashion advice.
Give them a budget that is fair according to your household income. Let them decide how to dole out their clothing dollars to what is most important to them. Help them learn to decipher trends. Buy them books about dressing well and style. Educate their interest in fashion and don’t put them down for it. That will only alienate them from you.
Teach your children how to buy fashion at a discount. Help them learn ways to look trendy and fashionable on a budget. Honor their sense of style and try to set a good example by your own appearance.
Show your kids on-line biographies of famous people in history who were poor and did great anyway. This will help them to understand that certain qualities such as intelligence, creativity, and tenacity mixed with honesty and integrity will take them far.