I live in a wealthy city, and if I wanted, I do have the money to buy my dd brand new clothes for Kindergarten. But except for a few articles of clothing that her grandmother makes, all of her clothes, (and mine), come from Goodwill, garage sales, and hand me downs from other families. There are quite a few reasons for that.
First of all, when I look at the new clothes in the stores and compare them with the used clothing that my dd gets, the new clothes are much poorer quality than the used clothing. The new clothes don't last very well and they don't take washing very well and shrink and fade. If you compare the new clothes with the used clothes, the used clothes look a lot nicer. After a few months of wear, the originally new clothes don't look as nice as the originally used clothes.
Second, children grow out of their clothes so quickly. (It's not like adult clothes, where if you stay the same size, you can wear the same clothes for years.) Even though I have the money to buy brand new clothes, it's depressing to spend money on clothes that won't be used for very long. I have better things to spend my money on. You do, too. It's just that yours involve the basic necessities of survival, and mine are more along the lines of discretionary purchases. But the fact remains that it's not just the poor children that wear hand-me-downs.
Third, when I was in elementary school, I remember putting on a hand me down dress, and going to school to show and tell excited to show off my hand me down and explain where it came from. I was the oldest child, and the hand me down came from a friend of my parents, but the dress was new to me, and I loved talking about where it came from.
Fourth, I think it is wasteful from an environmental standpoint to buy new clothes when I can buy or be given used. So from an ecological standpoint, we don't buy new clothes. I think this will become a more popular trend and you can just think of it as being more green.
Fifth, I think clothes should be for playing and getting dirty. I don't know why parents send their children to school wearing expensive clothes when they will come back from the playground just as dirty as my child's used clothes. I don't worry about my child ruining an outfit that cost me 50 cents at Goodwill, but I would if my child were wearing a 50 dollar outfit. Without looking at your income tax forms, how will anyone be able to tell that you're dressing your children for the same reason as I?
So your kids might not be dressed any differently than the richest children in your school.
The teachers at my daughter's daycare always compliment me on my daughters clothes, and ask me which stores I buy them. I proudly tell them, "Gooodwill", and they cheerfully laugh and congratulate me that this is clever. So hold your head up high. You are smart about value not to pay for status.
(After 7th grade, I don't know. That's such an annoying age, because I do remember that clothes became an issue in the wealthy town that I grew up. I suggest checking out from the library a book called The Millionaire Next Door. It is a really simple book for a fifth grader to read. I think it only has two sentences per page, so you could probably read aloud parts of the book to your second grader as well. It is actually a good bedtime read-aloud book, written at the level for children, and yet it is on the required reading list for some of the most famous financial planners. This book was written by an author who did surveys of the personal lives of millionaires, and found some surprising statistics. The really rich people don't look rich. They don't have fancy cars or take fancy vacations. People who have flashy things like that generally are deep in debt to give the appearance of being rich. Reading this book together as a family will help spark a discussion about how adults struggle with the same kind of issues that children do, and I think that will help your kids feel better about their clothes.)
I also think telling your children the story about Dolly Parton's song, The Coat of Many Colors, might be helpful.