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Gift Budgets Make For Happy Holidays


The holidays are a great opportunity to teach your kids about money and the need to make choices to stay within your spending limit.


Here's a two-step plan to keep your holiday spending in line:

  • First, develop a budget.
  • Second, stick to it.

Some may want to quote Santa Claus: "Ho, ho, ho." Clearly, the second step is harder than the first. But following your spending plan isn't impossible if you track all expenses during the holiday season. It's a great opportunity to teach your kids about money and the need to make choices to stay within your spending limit. Remember: Your example is the key to success.

Save your receipts. Then crank up the computer spreadsheets, or sharpen a pencil and maintain a ledger or just keep a running total of your spending on the back of an envelope. Show your kids what you're doing and tell them why it's important. For many kids, it will be "grownup stuff" and therefore interesting. Keep in mind that an honest question deserves an honest answer.

You don't have to get fancy when tracking expenses, but you must be accurate. Warning: If you wait for the credit card bill to arrive in January to see how closely you've stuck to the spending plan, you're almost certain to overspend.

Make a list of who you're shopping for this year. Calculate what you can afford to spend. A good starting point might be 1%-1.5% of your annual take-home pay. Resist the urge to overdo it. Keep it simple – a good book or CD will be remembered long after that expensive gizmo has stopped working.

If you haven't done it this year, set a little aside each month starting in January for the next holiday season. Setting up an automatic transfer at your bank makes the saving easy, foolproof and painless – and you'll rediscover the glory of compound interest. If this is new to your children, take the time to explain it.

The holidays are a good time to teach your kids a basic lesson: They can't have everything, a lesson many adults never learned as evidenced by the nation's huge consumer debt. Show your children how to set priorities and tell them about the need to make tradeoffs. Plan to help them manage expectations, especially as ads pitched to children flood the airwaves during the holiday shopping season.

If you're shopping for an extended family, there's no need to have every member of your family buy a gift for everyone else. Instead, draw names out of a hat. A few nifty gifts will be more appreciated than a raft of so-so things that are tucked away and quickly forgotten.

If you have the skill and time, making a few gifts is a good way to stay within your holiday budget. A handmade wooden push toy, teddy bear or doll will be a one-of-a-kind gift and most children will be thrilled to receive it. The flip side: Grandparents will be delighted to receive something made by your children.

Got a philatelist in the family? There are specialty magazines for just about every hobby and ordering a subscription online or by phone is a snap. Ask about holiday discounts.

There are many inexpensive things you can do to stay within your budget. In most cases, a card is appropriate for distant relatives and most friends. You can save postage – and a tree – by zapping an e-card. Many kids love electronic greeting cards because they're animated, accompanied by a soundtrack and are often interactive. The cards also teach young children the basics of using a personal computer. The clincher: Many e-cards are free.

Leave room for surprises, but keep them within your budget because a crushing credit card bill dims the glow of a special gift and the holiday season. Next year, keep an eye out for bargains and if you see the perfect gift at a summer craft fair, grab it. Lessons for your kids: Shopping for the best price, delayed gratification, and thinking of others – heresy in a consumer society.

Shopping online will help preserve your sanity by limiting your time at the mall and trips to the Post Office for out-of-town relatives. You'll save on gas and probably on sales tax. Be sure to check on shipping charges because fees can quickly erode any savings.

Don't let the pressure of holiday shopping squeeze the joy out of the season. Be sure to take time to do something with your kids – ice skating, a light-hearted movie or just a cup of hot chocolate. Your children will remember the quiet moments with you.

The holiday season is also a good time to teach your children about charity. Take time to visit a nursing home or help with a holiday meal at a shelter. Your kids will learn about sharing and quickly understand how lucky they are.

"The Nutcracker" is a terrific ballet for children, particularly for little girls who attend the performance in their tutus.

With a little planning and accurate record keeping, you can prevent your dreams of the Sugar Plum Fairy from becoming a nightmare when the credit card bill arrives.

Check out our collection of the very best in parent-friendly personal finance, Shopping With a Purpose, for more ideas and information on helping your children learn and grow through finance this holiday season and beyond!

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