Tis the season of spending and everyone’s already dashing up and down malls or madly browsing for that special gift to get for their loved ones. While most have plans and only spend the money they have allocated for this purpose, there are those – and their numbers are quite shocking – who take a huge chunk out of savings just so they can get stuff that will, for the most part, be broken and trashed or forgotten about in a few weeks’ time.
A study by T. Rowe Price found that a surprising number of parents were sacrificing their own long-term financial security for the sake of gifts to give their kids which won’t last more than a month or two. The company, in its “2015 Parents, Kids & Money Survey” took into account 1,000 parents from across the country that had kids aged between 8 and 14 years, and found that 62 percent of them admitted they spent more on their children over the holidays than they really should have.
And that’s not even the bad news. What is even more worrying is where the parents got the money from. According to the survey, 56 percent of them took the money out of their current income, 47 percent used their credit cards, 9 percent used their emergency funds while 7 percent dipped into their retirement savings.
Stuart Ritter, CFP, senior financial planner at T. Rowe Price, says, “Our long-term goals, such as retirement savings and having an emergency fund, should always take priority over anything that is presented with a bow and purchased during a Black Friday sale.”
Apart from the emotional rollercoaster and stress the holiday season triggers, parents may also try to make up for the time they couldn’t spend with their kids by splurging on them and unknowingly make a huge impact on their lives.
“Kids will always have long wish lists, and it’s good for them to know that there isn’t enough money in the family budget to cover everything. Challenging them to prioritize their wants and make trade-offs is essential to helping them develop critical financial capabilities.
“It’s always tempting to splurge around the holidays, but parents aren’t doing themselves or their kids any favors by overspending. We’re all inclined to be more generous this time of year, and it’s important to be mindful of the financial trade-offs we’re making and stick to a budget that aligns with our priorities,” Ritter said.