Percy Claude Spender had a difficult childhood. He was born on 5 October 1897, the fifth child of Frank Henry Spender and his wife Mary (née Murray). Since marrying in 1885 in Norwood, Adelaide, Frank and Mary had produced children steadily. Percy's three brothers, Augustus (Gus), Frank and Lionel were born in Adelaide, in that order, between 1886 and 1889. The family then moved to Sydney in 1890. The first girl, Lavinia, was born in 1893, followed by Percy, and then another daughter, Alice, in 1900.

Percy's father Frank, himself one of seven children, was ‘an independent locksmith’ in Darlinghurst Road, King's Cross, and Percy was born in nearby William Street, at number 153. Frank had grown up in Adelaide, where his father, Job, was a successful master builder and was ultimately appointed the city's Clerk of Works. The line of Australian Spenders is traceable to western England in the fourteenth century, with the most direct descendants concentrated in Wiltshire, particularly at Trowbridge and Bradford on Avon. The name ‘Spender’ connoted a class of minor officials dispensing the moneys of dignitaries. Percy's father Frank was neither official nor dignitary but was well-regarded, both in the neighbourhood and as a tradesman.

All of Percy's childhood homes were in close proximity: William Street, first number 153, and then number 188; from 1905 to 1914, in the terrace above his father's place of trade, 29 Darlinghurst Road; and then back to William Street, briefly number 229, and later number 191.