Five More Things We Learned About Holiday Spending From Talking to a Couple of Economists

By Madeline Daniels, America Saves Communications Director

America Saves recently shared some of our favorite thoughts and lessons from our conversation with two economists who often have different views about savings issues that impact not only the national economy, but our families as well.

We asked Aaron Klein, a fellow of economic studies at Brookings Institution, and Mark Calabria, the director of financial regulation studies at CATO Institute, about the role of holiday spending in the nation’s economy. Click here to view their entire conversation.

The conversation was so chock-full of facts, tips, and insights, that we had to share five more: 

1. Create your budget before shopping

Ideally, you’ll begin your holiday season prepared with some savings. And another helpful tool Mark suggests is starting out with a budget that keeps spending down. If we shop in isolation, it begins to add up quickly. A better way is to plan who we’re going to shop for and how much we’re going to spend before heading to the stores.

And if you’re not watching your money carefully, Aaron explains, you’re probably falling for a spending paradox. That is, the more people spend the less they care about the dollar amounts. So if you buy a house or a car, you’re thinking less about an extra $1,000 here or there. But if you’re at the mall buying clothes, you would never casually throw in an extra grand worth of items.

2. Economists are unsentimental

Economists are unsentimental, Mark confesses. You may have heard an economist suggest that cash or gift cards are the perfect gift because the recipient can get exactly what they want without having to store any weird handmade sweaters in the closet for years and years. But, admittedly, there’s value and sentiment in hand-selected gifts that sometimes economists miss, something both economists can agree on.

3. There is a massive redistribution of wealth among friends and family over the holidays

Mark shares an interesting point that that we don’t often discuss, but should be obvious: the largest amount of redistribution of wealth that goes on between friends and families happens during the holiday season. Younger people in their teens and twenties often get more than they give, thanks to older family members.

Older people fundamentally spend less than teenagers, Aaron suggests. They don’t necessarily earn more. That check from grandma and grandpa may have been saved over the year from social security, or the money they made on a yard sale.

4. The gift of time can be just as valuable, and the timing of the gift doesn’t make it any less

When we talk about the economy, we often are talking about money. But Mark makes the point that there’s importance in non-monetary gift giving. For some, the gift of time is even more valuable than something of monetary value. It’s a great idea for a younger person, who can gift their parents time helping around the house.

5. If you’re using a credit card, shop last minute

While the use of credit cards can encourage us to spend more than we otherwise would have, they can be a valuable tool when used responsibly. As Aaron explains, you can end up spending less in interest than you would skipping the credit card, over drafting your checking account, and being hit with fines.

Any cash you receive during the holidays can be used to quickly pay down your holiday charges. And if you’re planning on using your tax refund to pay off debt, Aaron suggests filing early because you accrue interest on a daily basis.

Similarly, Mark advises, you can save yourself a month’s worth of interest by charging gifts last-minute instead of purchasing them in November.

[Aaron 24:35]

Looking for more? See our first five things we learned about holiday spending from talking to a couple of economists here

 

Tip of the Day

  • Written by Tammy G. Bruzon | February 3, 2017

    Most families don't have enough to cover the unexpected. Be prepared with an emergency fund: http://bit.ly/2kpOikO @MilitarySaves #MSW2017

Saver Stories View all »

One Sailor's Course to Financial Freedom

Written by Super User | November 26, 2010

We all know its not easy to get out of debt once you in over your head. But it can be done with the sound advice and support that the Military Saves program offers. I am a testament to that. I was a recently divorced, single mother. Like many people I had credit card debt, a car loan, bad credit, and a low income job that never seemed to be enough to put food on the table.

Then I decided I'd had enough of living paycheck to paycheck and worrying about money all the time.

Read more...

Savers Pledge Leads to Savings Success

Written by Super User | October 13, 2011

My name is Rob and I am a Staff Sergeant in the Marine Corps Reserve. My financial success is a huge result of the Military Saves Campaign.

My journey began five years ago after marrying my wife, Lisa. We entered our marriage with no savings plan in sight, carrying debt and living in a tiny apartment. After seeing an advertisement for Military Saves, we decided to grab the reigns of our finances and implement a positive financial plan.

Read more...

Regular Savings is the Key to Success

Written by Super User | November 26, 2010

My name is Chris Strong. I joined the Air Force on 25 March, 1985. On that day, my financial life changed forever. I was introduced to saving bonds in Basic Training. Savings bonds were the big thing back then just like the Thrift Savings Plan is today. A Colonel gave us a briefing. I cannot remember his name but I can remember the 100 savings bonds he had posted to a piece of card board. He gave us a speech on the importance of saving money and how it can change your life. He inspired me to save.

Read more...