By Teneshia “Miss Money Sense” LaFaye
Almost 70 percent of Americans are a missed paycheck away from being homeless (or moving in with family) because they have less than $1,000 in a savings account.
Yet, the average American parent plans to spend at least $422 per child on Christmas presents this holiday season according to a new survey by investment firm T. Rowe Price. Unless that child is Jesus, I don’t understand why a child warrants spending so much on Christmas gifts that will be broken or forgotten by New Year’s Eve.
Instead of feeling pressured to keep up with the Jones who are up to their eyeballs in credit card debt, more parents and people in general should stop buying into the Christmas shopping circus and teach their children and families how to be financially responsible.
It makes no sense to me that most working families have virtually no savings in case of a job loss or a disability, but they somehow are able to spend nearly $500 per child for a single day event that isn’t even that child’s birthday. A family with three children could spend almost $1,500 on Christmas gifts.
That money should be tucked away into several savings vehicles, such as a money market account, a CD and a college savings plan, and some of it can be used toward paying off credit card debt and other loans.
Based on a modest 3% interest rate in a Roth IRA or a bank CD, an annual $422 deposit can grow to $5,460 in 10 years and the $1,266 that isn’t spent on presents for three kids can morph into $16,451 in 10 years.
I’m sure if you ask your children, 10 years from now, if they would rather have the presents or the money, they would take the money.
So folks, stand your ground and stop spending your hard-earned money on forgettable Christmas presents and starting saving and investing to be financially stable. It will teach your children a valuable lesson of responsible saving instead of frivolous spending.
I challenge you to open up a Roth IRA at your bank this holiday season and make it a Christmas tradition to take your family with you to make an annual deposit to spread the gift of financial responsibility.
Teneshia LaFaye is a former award-winning newspaper journalist and a nationally certified financial education instructor. She leads more than 100 people in a home-based business and she owns a health insurance agency. Her two books, What My Mom Taught Me About Money and Mom’s Money Lessons, are available on her web site, www.mytensense.com. Get her FREE daily money tips to work on improving your financial mindset by “liking” her MissMoneySense page on Facebook, www.facebook.com/missmoneysense