Holiday shopping can be a weak spot for even the most money savvy among us. When it comes to giving to others it’s tempting to go overboard and bust our budgets to make the holidays special. We want to give our families the best of everything, but at the end of the day we know that’s not a good long-term strategy. Not only does it put us in the position of being more financially insecure, but it also teaches our kids the exact wrong lesson about money.
According to a recent study by T. Rowe Price on family holiday spending most parents will overspend on holiday gifts. A survey of 1,000 parents shared that a whopping 62% of parents agreed that they spent too much on the holidays. Additionally, 7% of parents have used their retirement savings (!) to pay for the holidays, while 9% have dipped into their emergency funds.
The financial trade offs for dipping into your savings or retirement can be devastating or at the very least put our financial security at risk.
While it may make for a happy holiday, it’s certainly not going to help you with your financial goals. Come January you’ll regret spending too much.
My Kryptonite: Holiday Shopping
I’m no stranger to overspending. It’s my Kryptonite. I love to buy gifts, and I love holiday shopping. While most people avoid the mall and stores I love shopping during the holiday season! It’s festive and fun. Finding the perfect gift for someone is an incredible feeling-I love seeing their faces when they open their gifts!
In our former spend heavy years we would often rely on credit cards instead of savings for the holidays. Since we’re pretty frugal (and clutter drives me bananas) we would use birthdays and holidays as a time to ‘spoil’ the kids. The problem? We were overextending ourselves so when it came time to pay off those holiday bills I was always filled with regret.
When I learned better money management strategies and we got motivated to pay off debt and save it became easier to scale back. The more we saved and the more we paid off the more I was motivated to stick to a modest budget. And let’s be honest ‘spoiling’ the kids leads to them being spoiled-not the values we’re trying to teach them at all.
How NOT to go broke this holiday season + teach kids to stash their cash
Most people love to buy gifts for others at the holidays. We like to show our love and appreciation and gift giving can be a great way to do it. While the thought is a wonderful one, learning to stick to your budget can be a wonderful lesson in living a centsible life.
Save for the holidays:
If you haven’t already saved for the holidays, do it now! While you may not be able to set aside as much as you’d like it will give you a realistic budget to work with. You won’t be tempted to spend on credit cards or pull money from savings to cover your gifts.
For kids: Have them put aside their allowance for the next few weeks or sell a few items to buy gifts for others. Don’t just pull out your credit card to cover their gift giving costs.
Don’t shortchange yourself:
Give yourself the gift of financial security-sock money away in your emergency savings account or add money to your retirement fund. While it’s not as Instagram-worthy as a pile of gifts under the tree it is much more valuable.
For kids: Remind them to do the same. Sometimes they are gifted holiday cash-instead of letting them spend it all encourage them to set aside a portion of their holiday money.
Give the gift of savings:
Instead of spending all your money on toys they won’t play with in a week consider gifting them savings. You can add to their savings account, sock money away in a 529 college savings account, or even open an investment account. If family or friends ask what to get the kids consider passing on this tip!
For kids: Discuss what they are saving for whether that’s college or spending cash for a trip you’re taking in the future.
Send mom shopping:
Despite popular stereotypes moms tend to stick to their holiday budgets better than dads. More dads surveyed admitted to going over budget, dipping into emergency savings, or pulling money from retirement to cover holiday costs.
For kids: Take mom along. Trust us she knows how to spot a good deal and won’t let you overspend.
Give to those in need instead
While it’s tempting to go ‘all out’ on special gifts for the kids consider using your love of the holiday season and gifting to give back to those in need. Here are just a few ways you can give back:
- Adopt a family through your school, church, or local community.
- Create a winter coat drive for kids in your community.
- Send 10% of your holiday budget to a charity or cause you support.
- Give your time to local shelters, soup kitchens, or schools.
- Create holiday packages for homeless people in your community-include items like hand warmers, warm socks, non-perishable food, and more.
- Donate books to a shelter, school, or group home.
- Give gifts that give back to artisans or the local community.
For kids: Encourage them to give back in ways that are age-appropriate. Older kids can volunteer while younger kids might need to create their own opportunities. Talk to them about who they want to help-their answers may surprise you!
Whatever your plans this holiday season spending less and giving more will not only feel great, but you’ll be teaching your kids a lifelong lesson in giving.
To help parents teach kids about money, T. Rowe Price launched MoneyConfidentKids.com, which provides free online games for kids and tips for parents, focused on financial concepts such as goal setting, spending versus saving, inflation, asset allocation, and investment diversification.
Disclosure: This is a sponsored post on behalf of T. Rowe Price. All opinions are my own.
Find the full press release on the survey results here.
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Please note that a 529 plan’s disclosure document includes investment objectives, risks, fees, expenses, and other information that you should read and consider carefully before investing. You should compare these plans with any 529 college savings plan offered by your home state or your beneficiary’s home state. Before investing, consider any state tax or other benefits that are only available for investments in the home state’s plan.