SHOW NOTES
It may seem a little cold for us to talk as if money is the number one concern for families at Christmas time. After all there are so many other great things going on at this time of year. It’s a really special time no matter your religious affiliation. It’s a unique atmosphere and the holiday feeling still makes it feel different. That, on top of the fact it comes right before the end of the year, when we may all be feeling a little more reflective than usual anyway, makes it a great time to take stock of a lot of things. Here, we talk about money, because that’s what we do. But we’re doing it in the context of all the great stuff about Christmas too.
Of course, a lot of that may be a little more complicated this year. Normally, we’re all starting to think about travelling to see family, but with all the lockdown rules in place around the world and restrictions on international travel will be changing things for millions of people. On the plus side, maybe that means we’re in for a slightly less expensive Christmas than usual. Even a chance to put a little money aside for next year, when vaccines should be rolled out and we should be somewhat back to normal. Let’s hope so anyway!
If you look into some of the statistics around Christmas spending, there’s some super interesting stuff. For one, did you know that higher-income families are more likely to do most of their Christmas gift shopping online than lower-income families? That’s a pretty tough stat to swallow for me, and here’s why.
It has to do with one of the things that came up when we were researching the Black Friday episode you heard last week. We found out that people are more likely to overspend on their budgets when they shop in a store than they are when they shop online. So put these two pieces of research together, and what I think you can conclude is that it’s the people who can afford it the least who are the MOST likely to overspend on the holiday budget.
And here’s another reason why: lower-income households are also more likely to be doing a lot of Christmas shopping on credit, and expect to go into debt in order to finance their Christmas shopping. One piece of research shows that 29% of Americans intend to use their tax returns to pay off that debt. If we think about others who go into debt, that must mean a whopping 71% either have to pay off the debt out of savings, or they will simply increase their debt.
When you think about the interest credit card companies charge on the money you spend, it’s a sobering and scary thought. If you take a typical family’s spending on holiday expenses of around $1,000, assume you only pay off the minimum monthly amount of your credit bill, at the average credit card interest rate, you will end up paying back over $1,500 for that original $1,000 spend. And it’ll take almost 71 months. That’s six more Christmases, meaning more expenses and more debt. You can really see how it is a truly vicious cycle.
Anyway…this is all getting pretty heavy for a festive time of year. But it’s so important to remember why learning about money and how it works at an early age is SO important. We talk about a lot of cool, interesting, positive stuff at Money with Mak and G, but if we succeeded in just getting one person to think about finances early on and avoid getting into debt, we would be incredibly happy. Of course, we hope it’s a lot more than one person.
Hopefully, even the super expensive periods of the year like Christmas will get a little more manageable with the tips Makenna and Grant came up with in the last episode. Remember – SPLAT: Save, Plan and Tighten Up.
One more thing. Of course, saving is great, we’re big fans of saving here. But there is a super interesting way of looking at saving that I want to share with you. Because of inflation, which just means that the overall value of your money decreases constantly. We see that things continue to increase in price, and unless your money is growing, you won’t be able to buy the same amount in the future with the money you have today. That’s inflation.
Looking at this over the past 20 years, inflation means that prices are just over 50% higher today than they were in the year 2000. That means that $100 you saved in the year 2000 is worth less today than it was when you saved it. That $100 might have paid for two weeks’ groceries in 2000, but only one week’s groceries today.
This is why investing is so important instead of just saving. Investing in the right way means that the dollar you saved will go up in value, hopefully in line with inflation or better, which means you’re not losing purchasing power over time. I think we can all agree that’s a good thing.
The last thing I would add is to be ready to say no. Not every Christmas has to look like a catalog shoot. The most important thing is being together with loved ones, putting down our smartphones and laptops for a few days, and connecting with each other instead. Remember we don’t have to look rich to be rich.
Until next time, thanks again for being here, please like, comment, subscribe, and review, and we’ll see you back here again real soon for more Money with Mak & G.
TRANSCRIPT
It may seem a little cold for us to talk as if money is the number one concern for families at Christmas time. After all there are so many other great things going on at this time of year. It’s a really special time no matter your religious affiliation. It’s a unique atmosphere and the holiday feeling still makes it feel different. That, on top of the fact it comes right before the end of the year, when we may all be feeling a little more reflective than usual anyway, makes it a great time to take stock of a lot of things. Here, we talk about money, because that’s what we do. But we’re doing it in the context of all the great stuff about Christmas too.
Of course, a lot of that may be a little more complicated this year. Normally, we’re all starting to think about travelling to see family, but with all the lockdown rules in place around the world and restrictions on international travel will be changing things for millions of people. On the plus side, maybe that means we’re in for a slightly less expensive Christmas than usual. Even a chance to put a little money aside for next year, when vaccines should be rolled out and we should be somewhat back to normal. Let’s hope so anyway!
If you look into some of the statistics around Christmas spending, there’s some super interesting stuff. For one, did you know that higher-income families are more likely to do most of their Christmas gift shopping online than lower-income families? That’s a pretty tough stat to swallow for me, and here’s why.
It has to do with one of the things that came up when we were researching the Black Friday episode you heard last week. We found out that people are more likely to overspend on their budgets when they shop in a store than they are when they shop online. So put these two pieces of research together, and what I think you can conclude is that it’s the people who can afford it the least who are the MOST likely to overspend on the holiday budget.
And here’s another reason why: lower-income households are also more likely to be doing a lot of Christmas shopping on credit, and expect to go into debt in order to finance their Christmas shopping. One piece of research shows that 29% of Americans intend to use their tax returns to pay off that debt. If we think about others who go into debt, that must mean a whopping 71% either have to pay off the debt out of savings, or they will simply increase their debt.
When you think about the interest credit card companies charge on the money you spend, it’s a sobering and scary thought. If you take a typical family’s spending on holiday expenses of around $1,000, assume you only pay off the minimum monthly amount of your credit bill, at the average credit card interest rate, you will end up paying back over $1,500 for that original $1,000 spend. And it’ll take almost 71 months. That’s six more Christmases, meaning more expenses and more debt. You can really see how it is a truly vicious cycle.
Anyway…this is all getting pretty heavy for a festive time of year. But it’s so important to remember why learning about money and how it works at an early age is SO important. We talk about a lot of cool, interesting, positive stuff at Money with Mak and G, but if we succeeded in just getting one person to think about finances early on and avoid getting into debt, we would be incredibly happy. Of course, we hope it’s a lot more than one person.
Hopefully, even the super expensive periods of the year like Christmas will get a little more manageable with the tips Makenna and Grant came up with in the last episode. Remember – SPLAT: Save, Plan and Tighten Up.
One more thing. Of course, saving is great, we’re big fans of saving here. But there is a super interesting way of looking at saving that I want to share with you. Because of inflation, which just means that the overall value of your money decreases constantly. We see that things continue to increase in price, and unless your money is growing, you won’t be able to buy the same amount in the future with the money you have today. That’s inflation.
Looking at this over the past 20 years, inflation means that prices are just over 50% higher today than they were in the year 2000. That means that $100 you saved in the year 2000 is worth less today than it was when you saved it. That $100 might have paid for two weeks’ groceries in 2000, but only one week’s groceries today.
This is why investing is so important instead of just saving. Investing in the right way means that the dollar you saved will go up in value, hopefully in line with inflation or better, which means you’re not losing purchasing power over time. I think we can all agree that’s a good thing.
The last thing I would add is to be ready to say no. Not every Christmas has to look like a catalog shoot. The most important thing is being together with loved ones, putting down our smartphones and laptops for a few days, and connecting with each other instead. Remember we don’t have to look rich to be rich.
Until next time, thanks again for being here, please like, comment, subscribe, and review, and we’ll see you back here again real soon for more Money with Mak & G.
