Here’s a priority check: Almost a third of parents (30%) don’t regularly save for retirement but do save regularly for holiday spending, according to a new survey from T. Rowe Price. And more than a quarter (28%) of parents don't regularly save for college but do save regularly for holiday spending.
It gets better: Although it’s a small number, 7% of parents have tapped their retirement savings and 9% have raided their emergency funds to cover holiday spending.
So maybe it’s not so surprising that 62% of parents with 8- to 14-year-olds in January 2015 agree with the statement, “I spent more for my kids over the holidays than I should have.”
“It’s always tempting to splurge around the holidays, but parents aren’t doing themselves or their kids any favors by overspending,” says Stuart Ritter, a senior financial planner at T. Rowe Price, in the press release. “We’re all inclined to be more generous this time of year, and it’s important to be mindful of the financial trade-offs we’re making and stick to a budget that aligns with our priorities.”
Ritter is also inclined to view some of the results in a more positive light. “Over a third of people are saving for the holidays throughout the year,” Ritter says. “And over a third of people did not agree with the statement, ‘I spent more than I should have.’ There’s a decent chunk of people who are doing it right.”
That said, one of the issues seems to be that many people have an all-or-nothing approach to budget discussions. “When they hear a financial planner start talking about other goals and making a budget, it’s ‘What? I can’t buy toys for my kids?’” Ritter says. “And that’s not the message.”
The key, he says, is understanding that you can achieve multiple goals, and spending less on the holidays doesn’t mean spending nothing on them. “Part of your gift to a child might be money you put aside for their college education,” Ritter says. “You can wrap multiple goals together.”
But it does mean you have to prioritize. People tend to save for the holidays because they come up—in a big financial way—every year, and retirement and college might be vague clouds in the future. But people must think longer-term.
“Our long-term goals, such as retirement savings and having an emergency fund, should always take priority over anything that is presented with a bow and purchased during a Back Friday sale,” Ritter says.
Plus, here’s some motivation to curb holiday spending: Parents who overspend on holiday purchases are more likely to argue, according to T. Rowe Price’s numbers, at nearly twice the rate of parents who did not overspend. If nothing else, spending less during the holidays results in less financial and emotional stress—meaning happier holidays for you.
And putting money away toward your golden years has its own rewards when you’re 70. “Saving for your own retirement is not sacrificing your kids’ holiday,” Ritter says. “You can have both, and you should.”
