The holiday season presents an ideal opportunity to discuss family budgets and plan for the upcoming year, advises Andrew Zumwalt, head of the University of Missouri’s Personal Financial Planning program.
Zumwalt highlights that family gatherings are prime times for conversations about holiday gift-giving budgets. Such discussions can help avert financial strain and misunderstandings, he notes.
It’s important to acknowledge that gift budgets may differ among family members, reflecting diverse traditions and practices. For instance, some families may prefer donating to charities over exchanging gifts.
A cost-effective and enjoyable alternative is organizing a “Rob Your Neighbor” or “Secret Santa” gift exchange during family events. These activities not only add fun but also limit the necessity of buying gifts for every extended family member.
Increasingly popular are gifts of experiences, such as movie or museum tickets, travel gift cards, or offering personal services like babysitting or yard work. Zumwalt emphasizes that these gifts, which encompass time and talent, are often the most cherished.
For parents, Zumwalt suggests giving children coupons for special one-on-one time or experiences, devoid of electronic distractions. These could include a simple breakfast together or a trip to a beloved park. Such gifts foster anticipation and happiness.
In situations of uncertainty, cash gifts are a universally fitting option. Despite seeming impersonal, cash gifts are practical and appreciated, according to Zumwalt. Grandparents might consider contributing to a grandchild’s 529 education savings plan, an increasingly attractive option.
Starting in 2024, savers will be able to transfer funds from unused 529 plans to Roth individual retirement accounts without incurring income tax or penalties. Zumwalt recommends consulting a financial expert for the latest information on these plans’ enhanced flexibility.
Zumwalt concludes by emphasizing the importance of valuing time spent together over material possessions during the holiday season.
Zumwalt offers several tips for effective holiday budgeting:
- Establish a budget and adhere to it.
- Anticipate additional expenses like “Secret Santa” exchanges or holiday dinners with colleagues.
- Avoid last-minute shopping to prevent overspending.
- Be cautious of overspending during early or Black Friday sales.
- Set aside funds for year-end taxes and other expenses.
- Utilize holiday downtime for planning next year’s household budget and goals, including estate planning.
