In a recent phone conference with a client, I learned that “George” and his wife “Kay” were at wits end. They felt financially strangled, trying to come up with enough cash to pay the bills. Since our last meeting, the hot water tank broke down, Kay’s car needed major repairs, and the dishwasher was ready for the heap. They also committed to an out-of-state wedding with their children, since they had no family vacation in years. Credit card debt ballooned and $9,000 was needed soon for an array of various expenses.
This couple worked very hard to reduce their credit card debt over the past few years. It took time, discipline and many small steps to progress. Now they considered taking money out of their IRAs to pay the bills. (NO!) They were not yet saving enough to build an emergency cash reserve or for retirement.
As we reviewed the list of upcoming expenses, Christmas was prominent among them. It was the only discretionary item they could reduce. I asked whether George and Kay would consider buying their children less expensive gifts and engaging in an out-of-the ordinary family activity together to reduce the Christmas price tag. Initially, that was not an option they would consider. After further discussion, they decided to make the wedding trip part of the family Christmas gift. They would explain to the children that gifts under the Christmas tree would be less expensive this year and why.
I asked parents with children in the same age group how they decide on Christmas or Hanukkah spending. One mother said “Christmas is only one day of the year. In our family, it’s Christmas all year long. We buy gifts for birthdays and small ones for the other holidays. For Christmas, my husband and I decide on a budget, set the money aside in envelopes, and only spend what we have.”
Another mother told me about paying thousands of dollars for ten years of her son’s year-round hockey games. One year he asked why they couldn’t go to Europe for spring break, since “EVERYBODY was going”. At home one day during the break, he asked his mother’s permission to visit a friend. She told him he could not go, because certainly his friend wasn’t home. After all, “EVERYBODY went Europe” for spring break!
At a time when much of the country, in fact the world, is tightening its belt, certainly we can and maybe should, lower expectations of ourselves, our children’s expectations and our spending. If this causes parental stress, the children will feel it too. Discussing the practicalities of finances with children (without laying a guilt trip on them) demonstrates financial health. Overspending and hoping it will resolve itself “later” or not discussing it at all, lays the seeds for their financial dysfunction.
Before the holiday frenzy takes hold, consider thinking about how you can make it joyful, while modeling financial responsibility to your kids. Years from now, they won’t recall the gifts you gave them. They will likely continue the example you set, and hopefully, all of you will remember a happy day.
Constance Stone, CFP®
Stepping Stone Financial, Inc.
Chagrin Falls, OH