The real cost of gift-giving: Financial stress – part 1

on November 12, 2020 / by Financial Mindfulness

The real cost of gift-giving: Financial stress – part 1.

The tinsel and decorations are still under the stairs, but now is the time to think ahead so that you don’t join millions of Australians saddled repaying holiday debt well into 2021.

One of the leading pressures on many people’s already-strained financial position is the habit of over-spending on gifts; gifts that don’t necessarily prove our love for others.

In this three-part series we will explore the size of our national gift-buying problem, look at the health impacts of the financial stress that follows and then explore how a targeted mindfulness practice can help change the auto-pilot approach to gift-giving while potentially bringing us even closer to loved ones.

There is also a real likelihood that gift-giving becomes retail therapy in these stressful COVID times – a set of behaviours we use to try and feel a bit better. But as Financial Mindfulness has found, overspending has the opposite effect on our financial stress levels.

Overall, Australian households spent an average of A$969 on Christmas gifts in 2019 (the total spend on gifts was expected to be $18.8 billion) according to finder.com.au. Last December alone, A$28 billion was spent on cards, with millions more put on Buy Now Pay Later accounts too, which a third of us now have.

Nearly half a million of us will take up to six months to pay off holiday debts, while more than half of us still manage a spending binge for on Valentine’s Day (with Buy Now Pay Later schemes increasingly funding this). All this while also juggling mortgage, student loan and/or car repayments.

The national home loan bill this year topped A$2 trillion for the first time, according to Illion, with an estimated 60,000 mortgage holders at least one month behind on repayments.

But while we are weighed down with unavoidable repayments on big assets, the retail calendar rolls on. Easter is next (luckily the major supermarkets stock around 50 lines of chocolate each, not counting millions of Easter buns), then comes Mother’s Day (May 14), when consumer spending spikes to around $2 billion, according to the Australian Retail Association.

From mid-year there’s often a string of birthdays to buy for: the most popular months for birthdays in Australia include May, July, August, September and October, according to the Australian Institute of Health and Welfare.

Anyone who has hosted a children’s birthday party knows how expensive and high pressure they can be, with parents forking out anywhere between A$300 and A$3000. Then there’s the angst over how to please teenagers and other loved ones, a worry which is almost always settled by spending at or above our absolute limit.

Around this time, many of us come to accept we can’t afford a splurge we might want – such as a later winter or spring holiday, or a newer car – with so many expenses and December just around the corner.

The pre-holiday gift-giving hasn’t finished yet. Father’s Day is September 3, (on which about A$700 million is spent), followed by weddings and wedding anniversaries galore as the weather warms up. Spring and autumn are most popular seasons, April, September, October and November are the most popular months to get married.

At the end of November, comes the newish retail binge-fest that is Black Friday, when we spent $2.9 billion over that weekend alone.

While it seems like the right thing to show our love by buying new toys, trinkets, treats and gadgets for children, family and friends the cost is in black and white in our online statements.

We spend thousands upon thousands of dollars each year to try and please loved ones, when if the tables were turned, most of us would be happy receiving thoughtful, inexpensive gifts – or even just spending time with friends and loved ones if we knew they were battling financially.

According to the most recent data from the Financial Mindfulness – Financial Stress Index (FSI) Report – September 2020, the vast majority (89%) of us are worried about money. Digging deeper, we are completely overwhelmed (79%), downhearted (82%) and distracted (77%) by our financial situation. Financial Mindfulness estimates the resulting lost productivity costs Australian businesses is $32.14 billion per annum.

AMP’s 2020 Financial Wellness Report in November 2020 found financially stressed employees are ineffective at work for approximately 7.7 hours a week, and absent for a further 1.2 hours a week through sick days.

The report said nearly half of Australian workers are feeling financially stressed for an average of six and a half years or more.

To find out how financial stress affects our health, check out part two in this three part series.