Personal Finance

Blog:

Holiday Spending: Who’s Naughty and Who’s Nice

November 21, 2016
Judith Ward, CFP®, Senior Financial Planner
T. Rowe Price’s annual Parents, Kids & Money Survey finds that when it comes to holiday spending, parents have trouble sticking to a budget.

Key Points

  • 64% of parents agree with the statement, “I spent more over the holidays than I should have.”
  • More than half of parents (58%) say they never stick to their spending budget.
  • 87% of kids are encouraged to be charitable during the holiday season by giving away toys or clothes.
  • More than two-thirds (68%) of parents save for the holidays throughout the year.
  • 25% of parents who charge gifts to credit cards say they pay them off the following month instead of carrying a balance.

‘Tis the season for sales and spending. Black Friday and Cyber Monday have become almost events in themselves as people seek the perfect gift at the perfect price.

But when it comes to holiday purchases, are your spending habits naughty or nice? In our annual Parents, Kids & Money survey,1 we asked parents and their children aged 8-14 and kids about their holiday spending habits. Here’s what we found.

Who’s naughty:

  • 64% of parents agree with the statement, “I spent more over the holidays than I should have.”
  • More than half of parents (58%) say they never stick to their spending budget.
  • 11% of parents have withdrawn money from a retirement account to buy holiday gifts.
  • 11% of parents have taken a payday loan to cover holiday spending.

Perhaps fueling the overspending is the sentiment (or I’ll call it guilt) that over half of parents (53%) feel obligated to get everything on their kids’ lists, regardless of cost. Because, really, who wants to be a Scrooge?

But that cost adds up. Parents spent an average of $422 on their 8- to 14-year-old child. One-third (34%) of parents surveyed spent $500 or more. It’s no wonder budgets are blown.

While some folks struggle to keep spending in check, there is some positive behavior around holiday spending.

Who’s nice:

  • Parents with more than one child are more likely to save for holiday gifts throughout the year (72% versus 58%).
  • 25% of parents who charge gifts to credit cards say they pay them off the following month instead of carrying a balance.
  • 87% of kids are encouraged to be charitable during the holiday season by giving away toys or clothes.
  • 69% of kids are encouraged to give money to charity.

So, what can families do to help keep holiday spending under control?

Make your list and check it twice. Make a list of who you are shopping for and then decide how much you can afford to spend on each person. While holidays are known for great deals, make sure impulse purchases don't blow your budget.

Consider who is naughty or nice. Once my siblings and I all had kids, we stopped buying gifts for each other and only bought for nieces and nephews. We would also chip in together to get something special for Grandma. Some of my friends draw names for extended family members with an agreed-upon spending amount and gift ideas.

Spread holiday cheer by making it or baking it. Who wouldn’t want homemade cookies, a pumpkin pie, or a handmade gift from the heart? Every year we look forward to getting pizzelles from our neighbor and sharing our family’s scotch shortbread. And, of course, there’s grandma’s fruitcake.

The more holidays I celebrate, the more I’m grateful for time spent with family and friends than anything that has a bow on it. You can’t put a price tag on those memories.

12016 T. Rowe Price Parents, Kids & Money Survey.

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