| Posted in Financial Literacy
‘Tis the Season for Financial Education
Christmas magic is in the air. And with it, the prospect of buying gifts for friends and loved ones. While the magic of Christmas provides plenty of opportunities for giving and receiving great gifts, it also provides a perfect opportunity to teach and instill good financial habits for kids.
Christmas purchasing can get expensive quickly, and keeping up with the latest trends and fashions adds up. But what if gifts were educational, financially? What if holiday purchasing could be used as a financial literacy lesson for young people about the importance of budgeting, saving, and making good financial choices?
Santa’s List, Budgeted
Looking through Christmas wish lists we can see an array of options ranging from electronics to apps and online purchases to classic toys and games. Buying all of it is out of reach for most people and presents financial obstacles as the number of gift recipients increases. What must happen is a budget and a game plan: How much do you want to spend on each person, and what items are most important to gift them?
When shopping for your family, it can be beneficial to bring kids into the purchasing process. Teach them how to ask the right questions, such as:
- What total amount do you need to set aside for Christmas gifts?
- How does budgeting change for December versus the rest of the year, and should one ever dip into savings to pay for gifts?
- How much do you spend on each person? How do you prioritize spending?
- When is it too much, and when is it not enough?
- What apps, programs, or methods work best for tracking and budgeting Christmas buying?
- What coupons or deals, either online or in-store, are available for gift buying, and how does one shop for the best price?
- What other considerations beyond the bottom line go into making a purchase? What methods optimize Christmas buying? Should you buy presents with credit cards? What rewards are available?
While it’s always tempting to max out and buy as much as possible for everyone (and it’s definitely a warm side of the Christmas spirit), this is not a sound financial decision and can cause issues with budgeting and finances later, especially if purchasing with credit cards was involved. It’s never the best choice to be paying off the Christmas spirit for months to come into the new year, especially if it negatively impacts your credit score.
There are also creative options for financial gifts themselves, including:
- Starting a bank account for a young person, and depositing the minimum balance in it to get them started
- Buying them a book or two about budgeting and finances
- Getting them a subscription to financial podcasts or an online resource
The Creative Christmas Spirit Can Last All Year Long
Though Christmas can be a great time to teach good financial habits, the lessons instilled from the season can last all year long. Basic budgeting rules still apply.
For instance, if applying the 50/30/20 rule to Christmas buying, how presents are budgeted into the 30% column (for wants) versus how they might be afforded by dipping into savings (the 20% column) can demonstrate ways to move money and allocate it dynamically, considering changes and unplanned purchases. And how does that impact the 50% allocated for needs? All of these are sound financial considerations.
Checking your bank account balance, especially through an online program or service, is imperative throughout the entire process. If working with a young account holder, show them how your online banking platform or app can help monitor and record financial transactions and budgeting. Show them how adults make smart budgeting choices and how their bank is a tightly integrated part of purchasing decisions for Christmas and the entire year.
If available and willing, talk to friends or other family members about how they budget for Christmas. It’s important to show kids the broad spectrum of ways to budget, save, optimize, and even earn while embracing the Christmas spirit.
If done right, budgeting and spending money on Christmas presents can not only be an informative lesson, but a creative and fun one, too.