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.
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?
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.
There’s nothing quite as exciting as unwrapping a present. Kids wait all year for the holidays and as their parents, you want to make them happy. This is why 60% of the parents surveyed claimed they try to check off every single item on their child’s wish list.
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. 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?
This holiday season, teach your kids that true happiness can’t be bought.
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.
Be an informed shopper this holiday season and your decisions will pay off in more ways than one.