Shopping on a Budget vs. Splurging: Smart Gift Giving

Featured Image Above From © Subbotina Anna @ stock.adobe.com — Shopping on A Budget

As this past holiday season distances itself, I have a question for parents out there in regard to future holidays: will your children really be happier with $300 worth of presents rather than $200 worth? Weekly Investments will compare whether splurging on someone is really worth it or should shoppers consider shopping on a budget.

Once you become a parent, financial decisions do not just affect you and your spouse. Children depend on their parents to put them in a situation to succeed. Do not confuse success with enabling, as from personal experience they tend to have more of an inverse relationship rather than a linear one.

One Thursday morning I was sitting in a Macroeconomics class tired and oblivious to my surroundings. My professor walked in the door and caught my attention when he held up two dozen Krispy Kreme donuts and told us we would be conducting an experiment. He selected a volunteer from the class and told her she would be eating as many Krispy Kremes as she could digest. The only stipulation was after each donut she would rank the overall taste and satisfaction on a scale from 1-to-10 (with 10 being the best). After the first donut, the girl went to the board and marked down a large 7. The second and third donuts were rated 6 and 4. The student ate a total of five donuts with each satisfaction rating slowly decreasing until it got to the point there was no longer any satisfaction left from eating any more donuts. Suddenly it dawned upon me, satisfaction comes from appreciation and scarcity. It is hard to appreciate something that is continuously available. Take air for instance. If we were asked to pick two things that we could take with us to outer space, would we choose a fidget spinner or Netflix? I would imagine food, water, and oxygen would be at the top of that list (at least for those wanting to survive). Yet nobody sits around and thanks God for oxygen unless there is some sort of deficiency. If a parent buys their kids everything in which they want, not only will they likely go broke from not shopping on a budget but they are also setting their children up for a life of pessimistic failure. For 99% of the population, our kids will have to go off on their own and learn to provide for themselves. Even if your kids grow up to be quite successful, do you think they will ever be able to truly appreciate the small things in life? The point is, we are wired to only appreciate things when they are not present. Every successful person is hungry to attain something in which he or she has not yet possessed. When they finally attain it, they move on to the next objective. It is extremely hard for a parent to refrain from giving their child everything, especially when the resources are present; but it is likely in the child’s best long-term interest to limit the giving of materialistic items that will likely get tucked under the bed or in storage within a few months. With stores such as Amazon and Walmart having free online ordering, it is easy to compare prices while still shopping on a budget. 

The point is, buying a purse for someone worth $400 or $100 will make very little difference. What will make a difference is maximizing their overall happiness whether it be by helping set that person up for success, aligning the gift with one’s passion, and/or taking part in an unforgettable experience; A few examples of smart gift giving may be buying a camera for someone wanting to make youtube videos, a trip with an ailing relative, or putting that extra $300 in a 529 college fund account. The purse I would consider a depreciable materialistic asset and would likely not to be around in 30 years. The camera, trip, and 529 college fund I would consider to be smart gift giving and will likely remain with the child for decades to come.

So when you are buying gifts for someone this holiday season, consider shopping on a budget unless you truly believe it is smart gift giving. It is not the amount you spend but how you spend it that will ultimately matter.

NOTE: Several studies have come out in the past decade that suggest experiences make an individual substantially happier than materials. In 30 years, are you going to remember that Louis Vuitton purse, or are you going to remember that cruise you went on with your children and their grandmother just a few months before she passed?

To learn more about budgeting and making money, visit Weekly Investments’ blog today.