Worried About Holiday Spending? This Is a Year to Think Differently

Dear Readers,

Like so much in our lives this year, the holidays are going to be different for a lot of people. Family gatherings are likely to be smaller, if they happen at all. Money may be tighter, with very little available for gift-giving. Traditional celebrations may have to be scaled way back or put on hold. But while we all may feel a little disappointed by the changes made necessary by the pandemic, I like to think we can still have a meaningful holiday season.

Perhaps this year, rather than being caught up in the usual buying frenzy, we can take time to be more personal and give extra thought to what would be the most appropriate way to acknowledge friends and family given the current circumstances. It takes some creative thinking, but it might just make the whole experience of giving—and receiving—more meaningful than ever. Here are some ideas.

Focus first on reaching out

Just because we can't all be together, doesn't mean we can't make a special effort to reach out to the people who are important to us. And it doesn't have to be about gifts. Of course, giving traditional gifts is fun and I enjoy choosing what I think is ideal for someone. But you can show those you care about how much they mean to you in many ways that don't have to cost a lot.

So first make a list of the people you'd like to acknowledge. Start with those dearest to you. If you want to give them a traditional gift, think about what would be most appreciated. It's not just about how much money you spend—even if money isn't an issue—but rather about why you think a certain gift will be just right. For some on your list, a small token will be meaningful. For others, sending a personal note that shows you're thinking about them can be enough to bring them some holiday cheer.

Think about a possible long-term benefit of your gift

It's fun to choose the perfect gift for someone and watch as they open it. But if you can wrap your gift in a long-term benefit—something with a future focus—it can be even more special.

One way to give your gift added meaning is to include some of your own financial know-how as part of the package. Everyone in your life—from your youngest child to your parents or grandparents—could likely use some extra help in managing their money. For instance:

• The perfect sweater might make your teenage daughter momentarily happy, but attaching it to a clothing allowance that she'll have to manage would give you the chance to teach her about budgeting, saving and spending wisely.
• A piggy bank for a younger child could come with a savings account and a future trip to your bank to learn about how money grows over time.
• Is someone on your list a student working part-time or a young adult with a new job? How about helping them open a Traditional or Roth IRA, maybe with some initial funding from you? You could even offer to match their contributions for a time. Get them started investing for the long-term and you've given a gift with a potential lifetime of value.

Even older adults, perhaps your parents, might benefit from a gift of knowledge. If they're struggling economically and you can help out in some way, that's great. But if you can also help them budget more wisely and ensure they're making the most of their Social Security and Medicare benefits, that could make your gift even more valuable.

Even if they aren't struggling, you could help them fine-tune specifics like insurance or estate planning by arranging for them to meet with the appropriate professional. That could open the door to important future conversations.

Add extra meaning to money gifts

A gift of cash is always appreciated. But you can give that money a meaningful context by earmarking it for a larger purpose or a long-term goal.

For example, opening and funding a savings or custodial account for a young person is a way to introduce personal finance and investing basics. Consider giving individual or fractional shares of stock to sweeten the deal. Creating or adding to a 529 plan for a child or grandchild is a gift to the parents as well as to the child. Or if kids are already in college, you could offer to make a direct tuition payment to the school. Helping with student loans can ease the financial burden for college grads.

Another idea is to jumpstart the process of saving for a big-ticket item like a car, a computer or a family trip. Or if you know that someone on your list has a cause or charity that's of particular importance, you could make a donation in that person's name.

Share an experience

For a lot of us, one of the most difficult things right now is not being able to spend time together. But hopefully that will change, so why not plan something you can look forward to? Whether it's with a friend or family member, planning a special event together—a dinner, a visit to the museum, a long weekend away—can be the most perfect gift of all. If you can foot the bill, that's great. But even if you can't pick up the complete tab, sharing the cost as well as the experience can be just as thoughtful.

Stay connected

Now, more than ever, we all need to know that others are there for us. The holidays can be a lonely time for some, and these days the sense of isolation can be even greater. So no matter how different your holiday celebrations may be this year, stay connected. Whether it's a gift, a card, a photograph, a phone call or a virtual gathering, the spirit you share can make this a joyful time in spite of the challenges—and help us all look ahead to brighter days.

Have a personal finance question? Email us at askcarrie@schwab.com. Carrie cannot respond to questions directly, but your topic may be considered for a future article. For Schwab account questions and general inquiries, contact Schwab.