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T. Rowe Price: Kids Who Get Everything On Their Holiday Wish Lists Are More Likely To Develop Spendthrift Habits
"We all want our kids to have amazing and memorable holidays, but there's evidence that being overly generous has consequences" says
"Parents who try to get everything on their kids' wish lists need to keep in mind the financial consequences. They need to ensure that they aren't taking on additional financial burden at the expense of other goals, such as saving for a vacation, home renovation, new car, their kids' college, or their own retirement," says Mr. Ritter.
To help parents have conversations with kids about setting goals and making trade-offs,
- Many parents work towards crossing off everything on their kids' wish lists rather than a budgetary number: 45% of parents agree with the statement, "I try to get everything on my kids' lists, no matter the cost."
- Trying to get everything on kids wish lists may have hidden costsfor parents: Parents who try to get everything on their kids' wish lists are more likely to finance their holiday spending (51% vs. 44%) and say that they have gone into debt to pay for something their kids wanted (48% vs. 26%). They are also less likely to have retirement savings (42% vs. 56%) and more likely to currently have a payday loan (10% vs. 4%).
- Kids may be getting the wrong message from when parents are overly generous: When parents say they try to get everything on their kids' wish lists, they are also more likely to report that they've tried various ways to get their kids to save their money, instead of spending it right away, to no avail (69% vs. 51%). Additionally, they are more likely to admit that their kids spend their allowance as soon as they receive it (56% vs. 38%).
- Nearly half of parents finance holiday spending: 46% of parents use credit cards to finance their holiday spending or have taken a payday loan to cover it. This includes 22% of parents who continue to pay off credit card balances from holiday spending more than six months after the holidays.
- Parents rely on current income and credit cards to cover holiday spending: Parents cite current income (67%) as the most popular way to cover holiday spending. However, credit cards (61%) are a close second, and only 28% of parents who use credit cards for holiday spending pay of their balances in full within one month after the holidays.
- A minority of parents use more costly methods of covering holiday spending: To cover holiday spending, 10% of parents have dipped into their emergency fund, 7% have taken a payday loan, and 4% have withdrawn from retirement savings.
- Most parents concede that they spent more on the holidays than they should have: 59% of parents agree with the statement, "I spent more on the holidays than I should have." In fact, 48% say, "I never stick to my holiday spending budget."
- Some parents spend more on themselves than their kids: 15% of parents agree with the statement, "I spent more on myself than my kids."
PROMOTIONAL HOLIDAYS AND ONLINE SHOPPING
- Parents actively take advantage of promotional days: Last year, 72% of parents participated in a promotional holiday, with Black Friday online shopping and Cyber Monday being the most popular (46% of parents participated in each), followed by shopping in stores on Black Friday (38%), Small Business Saturday (11%) and Giving Tuesday (5%).
- Promotional days are associated with splurging: Parents who participated in a promotional day are more likely to say that they spent more than they should have (62% vs. 53%), use credit cards to pay for holiday spending (63% vs. 54%), spend more than
$1,000on the holidays (48% vs. 28%), shop for themselves (54% vs. 36%), and spend more on themselves than their kids (17% vs. 10%).
- Parents wait for the holiday promotions to make big purchases: 80% of parents agree with the statement, "I wait for holiday promotions and deals to make big purchases."
- Online shopping has increased: The percentage of parents that shop in stores exclusively has dropped significantly from 28% in 2017 to 11% in 2018. More parents say that they shop mostly online, but some in stores in 2018 (43%) compared with 2017 (29%).
- But brick and mortar stores are still relevant: Only 2% of parents said they shop exclusively online in 2018, unchanged from 2017. The percentage of parents that shop mostly in stores, but some online has also largely remained the same between 2018 and 2017 (45% and 42%, respectively).
SAVING FOR THE HOLIDAYS
- Many parents save for the holidays throughout the year: 55% of parents say that they normally save for the holidays throughout the year, with most holiday savers starting to save mid-year (49%) and many starting right after the holidays (40%).
- More than half of parents spend less than
$1,000: 58% of parents say they normally spend less than $1,000on holiday costs. A minority (19%) say they spend more than $2,000.
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Heather McDonold, T. Rowe Price, 410-345-6617, email@example.com or Monique Bosco T. Rowe Price, 410-345-5740, firstname.lastname@example.org