
If you're wondering how you're going to pay for this frenzy of shopping while keeping your checking account in the black, you're not alone. According a T. Rowe Price survey, more than half of parents will aim to get everything on their kids' wish lists this year, spending an average of $422 per child.
Many of these parents will be paying for these gifts for months, or even years, afterward. But what's a busted budget next to holiday cheer, right?
Of course, before approaching any large-cost event, it's smart to create a budget. Unfortunately, 58% of the parents surveyed admitted that they thought they had created a budget, but didn't stick to it. Nearly two-thirds admit they spend more than they can afford. The Sym's clothing-store chain was famous for its tagline: An educated consumer is our best customer. Take a page out of their book and become an educated shopper this holiday season. It will empower you to make informed decisions about your spending before you hit the shops.
Short-term effects
Tipping
your budget just a bit every once in a while isn't a disaster. You can plan to
spend less the next month or pay off your debt with an expected surplus of
funds. But the spending hangover some parents can face from their holiday
shopping is too large to be easily forgotten.
Over
half the parents surveyed will pay for their holiday gifts with credit cards.
Just 61% of them plan to pay off their spending within three months, and 16%
say they will pay it off over the course of six months or more. That's half a
year spent catching up on holiday spending!
Think
carefully this shopping season before you drop another item into your cart. Is
this gift really worth trimming your budget for the next three - or six -
months?
Long-lasting effects
Even
more alarming than paying off holiday debt for half a year is the one-quarter
of the parents who have taken extreme measures to fund their purchases: 11%
have used money from their retirement accounts, 14% have taken funds out of
their emergency savings and 11% have taken out a payday loan.
While
their kids may be delighted with their loot, parents can be paying for it for
longer than they think.
Taking
$500 out of a 401(k) at age 35 translates into giving up $6,000 that was
earmarked for retirement. Parents are forking out additional taxes and
penalties to gain access to the money, and are also losing the opportunity for
that money to grow.
Your
kids may be thrilled that you're thinking of the here and now, but you'll pay
the price for living in the moment sometime in the future. Make sure each
purchase is justified and worth paying off over the long term.
Life Lessons
There's
nothing quite as exciting as unwrapping a present. There's the thrill of the
unknown, of guessing what lies under the colorful wrapping paper, and the
delighted whoop when the surprise is something you've been hoping to receive.
And
this thrill is intensified in children. Kids wait all year for that moment of
ripping open their gifts, and as their parents, you want to make them happy.
This is why 60% of the parents surveyed claimed they will try to check off
every single item on their child's wish list.
But
giving in to all their demands does nobody any favors.
Aside
from the financial drain, purchasing every gift your kids have their hearts set
on teaches them a host of lessons they're better off without. Childhood is the
time to create lifetime habits and mindsets. Do you really want your kids
thinking they can always have everything they want? Do you want them to feel
that everything they own must always be the best and most expensive?
Of
course, this doesn't mean skipping all or most of the items on your kids'
lists. But try to trim down where possible. Whether it's a new toy, electronic
device or even their own car; teaching your kids to be happy with a cheaper
version, or to forgo one or more items on the list, will be a lesson they will
carry for life.
This
holiday season, teach your kids that true happiness can't be bought.
Be proactive
You
can beat the budget-busting this season by saving up for the holiday season
throughout the year. While it may be too late for this year, it's never too
early to start thinking about next season! Just a little bit of money put aside
each month can take you through the holiday season without any long-lasting
scars. Sign up for our holiday club accounts, if you haven't already done so.
Be an
informed shopper this holiday season and your decisions will pay off in more
ways than one.
Your Turn: How will you fund
your holiday spending? Do you plan to buy your kids everything on their lists?
Why or why not?
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