Strategies for smarter gift-giving
Stressed about the cost of gift-giving? You’re not alone. In a recent survey of US adults, 76% of respondents reported feeling pressured to spend more on gifts to match social expectations.1
The strain of gift-giving can be especially hard during the holiday season. Consider this: if you buy $1,500 in gifts on credit this holiday and then pay only the minimum of $47.50 each month, it could take you 14 years to pay off the balance, including $2,556.67 in interest.2Yet, despite the pressure and financial stress, 38% of survey respondents would not consider a no-gift holiday season, and 44% have never skipped a holiday event to avoid spending money.3
But it doesn’t have to be that way. Here are some tips on how to be a savvier gift-giver and make the process less stressful, year-round.
Set a plan and start early
Research shows that roughly 2 in 10 Americans are adept at living within their means and deferring gratification.4Because they plan well and live within their means, they may resist the pressure to overspend by sticking with a plan and a budget. So, by thinking through your gift-giving and making sure it fits your budget in advance, you may also gain confidence and avoid the slump that comes from realizing you gifted outside your means.
Once you have your plan, start acting on it early. Overspending on last-minute gifts is an easy way to blow your budget.
Choose experiences over expenses
Millennials are ahead of the curve here. In a recent poll, 78% said they prefer receiving experiential gifts rather than things.5 That could be tickets to a concert or a sporting event, a spa weekend, a zoo membership, or a restaurant certificate. Often, you can spend less while providing a memory that lasts.
Save in advance and pay later
Another approach is to find stores that allow you to put a down payment on an item and pay it off, without interest, over time.
For holiday gifting, you can take advantage of a Christmas Club account. Invented during the Great Depression, these temporary savings accounts let you deposit money all year and then withdraw it at holiday time with no fees. Many credit unions still offer them. You can also create your own specialized savings account for gift giving by setting up a savings account at your bank or credit union and making automatic deposits throughout the year.
DIY instead of IOU
Do-it-yourself gifts are a win-win. You get the satisfaction of crafting something that’s uniquely you, while the recipient has the joy of a gift meant only for them. It can be as simple as a custom music mix. The value is in the time and thought you put into it, not the dollars.
Go digital
Let tech do the heavy lifting for you. Online apps can turn your smartphone into a combination shopping list and budget tracker. Other apps can help you find the lowest price on gift items, locally or online.
Think out of the box — and into the bank account
Financial gifts can have a longer-term impact on the recipient’s life, making your gift mean more than the latest product. If you’re looking for a financial gift for a young person, consider stock in a favorite company.6You can provide funds to start a portfolio and discuss what companies or brands they feel might grow. Or give the gift of education with contributions to a 529 plan, a tax-advantaged savings plan specifically designated for education costs.7
Buying and holding savings bonds, which can provide a payout over the long haul, is one way to teach young savers patience and how deferring spending today can create a larger payout in the future.8The US Treasury website makes it easy to give a bond as a gift.
And then there are custodial gifts, an easy, efficient way for a gift-giver to give money or property to a minor, knowing that the gift may be managed and invested wisely. The way it works is the gift-giver (donor) transfers money or property to a named custodian. The adult acting as the custodian holds, manages, and invests the property for the minor’s benefit until the minor reaches the age of majority, which may vary from state to state.
You may have heard that it’s better to give than receive. That doesn’t always feel true when the process of gift-giving leaves you in a financially uncomfortable place. But with these tips, you can enjoy the experience of giving someone a gift they’ll remember — and keep your finances intact too.
SOURCES:
1 Gifts are the Biggest Holiday Money Stress for 45% of Americans but They Refuse to Give It Up, Credello, Nov. 21, 2023
2 Minimum Payment Calculator, Bankrate
3 Gifts are the Biggest Holiday Money Stress for 45% of Americans but They Refuse to Give It Up, Credello, Nov. 21, 2023
4 The Guardian Study of Financial and Emotional Confidence™, 2021
5 Experience gifts vs. material gifts: Why experiences are better, Outdoorsy, Aug. 21, 2020
6 How you can gift someone stocks this holiday season, CNBC, Nov. 16, 2021
7 Great Financial Gifts for Kids for the Holidays, Investopedia, Dec. 15, 2022
8 10 best personal finance books, Money Under 30, Sept. 13, 2023
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