Article published by RJS Wealth Management Pty Ltd
For many time-poor parents, grandparents, aunts, uncles or godparents, the option of giving cash at Christmas is a godsend. Cash is easy to organise, cheap to post, and gives the added gifts of freedom and choice to the recipient. Family members living overseas or interstate can achieve legendary status by sending cash to hard-to-please child relations without fear of getting it wrong. But be careful, there are downsides to giving cash too. Unsupervised Christmas cash gifts will be quickly spent on low value items that won’t be appreciated. Give kids cash, but with care.
In a 2014 article for news.com, child psychologist Michael Carr-Gregg came out firmly against giving cash for Christmas1. He even went so far as to say it is “without Christmas spirit”. Harsh? We think so. He softened his comments by saying cash gifts that came without education on money management and saving were the main problem. In the same article, consumer expert Christopher Zinn worried that small kids given cash would fritter it away at the shops, buying low value items which would be quickly lost or broken. He was also concerned that kids given cash and left to their own devices wouldn’t understand the value of money. The piece went on to cite research by Roy Morgan on kid’s spending habits. It found that girls liked to spend their money on toys and clothes, while boys preferred console games. Both girls and boys said they would also put gift money in their bank account.
A British article from The Guardian explores the other side of the argument, coming down strongly in favour of cash gifts as the BEST present you can give to kids. It says giving cash avoids the thousands of unwanted presents given and received every year. No more wrong colours or sizes, no age-inappropriate presents and no more dodgy re-gifts. Giving cash removes all possibility of error, making it the best possible present (and it’s easy to post!). The article also favours cash gifts as a prime opportunity to teach kids the value of saving money to buy a larger item2.
Like it or not, giving cash is a growing habit among Australian families. A Roy Morgan survey in 2013 found that 66% from 2007 and we imagine it’s even higher in 2016. The average amount received was $85, and 38% of kids received $100 or more3. It’s time to accept that cash is a common gift for kids. Instead of complaining about it, focus on providing a sound financial education so they understand how to value it and spend it wisely.
Teaching our children money-savvy habits at a young age will set them up for financial security. Putting money aside each time a child receives cash for spending and investing, then investing a portion wisely, can be a price of a car or an airline ticket by the time they’re old enough to appreciate these things. Under a parents guidance, from a young age, kids can be involved in their own financial future. You can teach them exactly how good it feels to reach a savings milestone, or watch the value of their own share portfolio climb. Ask your planner for help if you need some guidance.
No more guilt, give cash and start their financial education
Giving cash as a Christmas gift should not be a guilt sodden experience. And if you’re a far-away grandparent or another relative, it could be your best option. But even if you live around the corner, cash as a Christmas gift is still ok. Any grumpy teenager will tell you it’s the best kind of gift. So, if you’re the parent (or even the grandparent) of a kid with a wad of Christmas cash, take the opportunity to teach them about money and the importance of saving. Encourage them to save a decent portion of every gift for a future purchase (or just for their future). Just as you must assemble the Barbie dream house or help with the Lego spaceship, you must be involved in how cash gifts are valued, spent and saved. That’s the trick to making cash a successful (and guilt free) Christmas gift.
Any questions about how to begin your kid’s financial education? We can help. Call RJS Wealth Management on 1300 256 526.
1. News.com: 9 out of 10 kids receive lazy cash gifts for Christmas – Dec 2014
2. The Guardian: Cash is the best Christmas present for kids – Dec 2014
3. Roy Morgan survey on cash gifts to kids – 2013
This blog has been prepared by RJS Wealth Management Pty. Ltd. ABN 24 156 207 126. RJS Wealth Management Pty. Ltd. is a Corporate Authorised Representative (No. 438158) of Modoras Pty. Ltd. ABN 86 068 034 908 an Australian Financial Services and Credit Licensee (Number 233209). The information and opinions contained in this blog is general information only and is not intended to represent specific personal advice (Accounting, taxation, financial, insurance or credit). No individuals personal circumstances have been taken into consideration for the preparation of this material. Any individual making a decision to buy, sell or hold any particular financial product should make their own assessment taking into account their own particular circumstances. The information and opinions herein do not constitute any recommendation to purchase, sell or hold any particular financial product. Modoras Pty Ltd recommends that no financial product or financial service be acquired or disposed of or financial strategy adopted without you first obtaining professional personal financial advice suitable and appropriate to your own personal needs, objectives, goals and circumstances. Information, forecasts and opinions contained in this fact sheet can change without notice. Modoras Pty. Ltd. does not guarantee the accuracy of the information at any particular time. Although care has been exercised in compiling the information contained within, Modoras Pty. Ltd. does not warrant that the articles within are free from errors, inaccuracies or omissions. To the extent permissible by law, neither Modoras Pty. Ltd. nor its employees, representatives or agents (including associated and affiliated companies) accept liability for loss or damages incurred as a result of a person acting in reliance of this publication.