‘Tis the season for spending. This time of the year it’s difficult to determine if the ringing you hear is jingle bells or cash registers. That leads to an interesting question: Have you ever wondered how your holiday spending stacks up to your friends and neighbors?
A recent survey may help you gauge your thriftiness or extravagance.
To be clear, the sheer number of gifts under your Christmas tree – or the price tags on those gifts, which you hopefully remembered to remove!! – have no bearing on your parent-of-year status. But they could have important ramifications not only for your bank account, but your children’s future financial habits too.
T. Rowe Price recently polled parents in the United States, asking how much they spend each year on their children for Christmas. In 2016, the average spending per child amounted to……drumroll, please……$422.
As you contemplate whether that amount makes you a Grinch, let’s acknowledge one thing. Most of this money is spent on gifts that will probably end up in a dumpster or on a curbside someday. From a financial perspective, the return on investment for most Christmas gifts is dismal.
So instead of blowing your entire Christmas budget on items that will be worthless someday, here are five ideas that are likely to increase the ROI on your gifts this year.
1. College Savings. If your son or daughter is planning to continue his or her education after high school, putting money into a 529 plan is a great way to give him or her a head start. Giving one or two less gadgets each year and investing that money instead in a 529 plan could generate a substantial college fund for your budding scholar.
In fact, for older children consider boxing up a 529 receipt to show them you are preparing for their life after high school. It’s truly the gift that keeps on giving, as college graduates have higher average lifetime incomes than their counterparts who dive directly into the working world after high school.
2. Individual Stocks. Purchasing a stock is a great way to encourage investing at a young age. Consider buying shares of your child’s favorite companies, such as Disney, McDonalds, or Apple. They can then watch their investment grow over time and potentially begin to understand the joys of passive income from dividends.
Another idea is to buy a small amount of a new investing rage, like Bitcoin. If the digital currency rockets higher, your child could end up with a healthy account balance. On the other hand, if digital currency crashes, your son or daughter would have a front-row seat to a valuable lesson on investment risk, speculation, and the importance of diversification.
3. Savings Account. If you’re not ready to fund a college savings account or buy your children volatile assets like stocks or Bitcoin, there’s nothing wrong with opening a regular savings account. Any local bank can set one up. It’s easy to do. Through a savings account you can teach your child the importance of saving by depositing a portion of monetary gifts they receive from birthdays, graduations, and other special occasions.
4. Personal Finance Books. It’s never too early to start teaching your kids about money. There is a wide array of books out there that can help children of any age learn about money. This includes picture books for children as young as 3 years old, and books for older children offering lessons on basic financial concepts.
5. Money Games. Another great way to teach your children about money is through the help of a finance-related game. This includes board games such as Monopoly, Life, and Payday. These games make learning about money fun. Your kids won’t even realize you are secretly preparing them for a successful financial future.
The holiday season is about giving. But as these five gift ideas illustrate, that doesn’t mean you can’t give gifts with real impact.
To be sure, there will always be a place under the tree for gifts that have no educational value, that simply delight your children and offer pure entertainment value. No one wants to be a Grinch.
After all, they are only kids for so long.