How Much to Spend on Holiday Gifts & How to Budget for It

How Much Should You Spend on Holiday Gifts?

In 2021, parents in the United States spent an average of $276 per child on holiday gifts. That same year, the American family spent an average of $886 on gifts for friends and family during the holiday season.

A survey by the National Retail Federation and Gallup polls in 2019 estimated that holiday spending on gifts for friends, co-workers, and family by Americans ranged from $659 to $942.¹ Amazingly, a large portion of the survey responders expected to spend over $1,000 on gifts, which is no small sum.

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Without properly budgeting for holiday gift giving, an individual could spend beyond their means and rack up a fair amount of credit card debt. In fact, 56.3% of Americans claimed to set a budget for holiday shopping in 2019. But by the end of the holiday season, only 64% of those who alleged that they’d adhere to a spending limit actually stuck to it.

A typical family in the United States spends about 1% of its annual take home pay on gifts. For example: an individual who brings home $50,000 might spend $500 on presents for loved ones during the winter holiday. The holidays can inspire feelings of generosity, but sometimes our desire to give outpaces our bank accounts.

How to Budget for Holiday Gift-Giving

Budgeting for holiday gift-giving isn’t easy, but there are some steps that you and your family can take to make sure you’re not spending more than you’re able.

Determine what you can afford

Before you start thinking about what to buy your loved ones for the holidays, review your income, expenses, monthly budget, and savings accounts. Some families will save money that’s intended to be used for gifting, while others may take a quick look at their utilities bills and credit card statements to determine what they can afford. If you’re traveling to see relatives for the holidays, remember that airfare might cost more than gifts.

If you anticipate spending a large sum of money, consider whether you’re going to have any extra income that may facilitate a shopping spree, or any large bills that might keep you and your credit card at home. Holiday bonuses are common, and many families may use that extra income to fund their holiday shopping.

Before you fill up your online shopping care and click “buy,” make sure that you have a solid understanding of how much money you can afford to spend and how it may affect your finances.

Time your shopping around sales

The holidays are a great time to buy big ticket items like computers and televisions because they frequently go on sale as retailers vie for business. However, the holiday season isn’t the only time of year to buy things. While Black Friday and Cyber Monday sales have earned their reputation with deep discounts, there are other times of year that are notorious for sales .

President’s Day and Memorial Day sales capitalize on long weekends. If you’re a person who plans ahead, shop sales at other times throughout the year. Not only will it help you to space out your spending, but by the time December rolls around, you might have half your shopping done already!

Make a list

You might’ve heard the adage that it’s a bad idea to go grocery shopping without a list when you’re hungry. Your eyes will be bigger than both your stomach and wallet and you’ll make impulsive purchases because your stomach growls when you walk past the chips and salsa. When you arrive home you realize you’ve bought three kinds of cereal and no milk because you didn’t have a list to keep you on track.

A similar logic applies to holiday shopping. Make a list of who you’re shopping for, what you plan to get them, and how much you’re willing to spend, and then stick to it. Don’t get drawn in by impulse buys or spending hundreds of dollars more than you planned.

Talk to your loved ones

Before you buy your mother a new air fryer, find out if it’s an appliance she has any interest in owning. Understanding the wants and needs of those that you’re shopping for can help you make more discerning purchases. You’ll be able to buy things that they actually want or need, rather than something you hope they’ll like.

Give experiences, not things

Not every gift is perfect. Who among us can say they’ve never opened a present and wondered what the gift-giver was thinking. Around 61% of Americans expect to receive a present that they dislike. The two most disliked presents were clothes and household items.

Instead of spending money on physical things that your recipient may not appreciate or like, consider gifting experiences like tickets to events, travel, and food and drink.

Budgeting for holiday gift giving can seem like a daunting task, but by saving money beforehand and understanding your financial circumstances, you’ll be able to give meaningful gifts to your loved ones that they’ll be sure to appreciate.