When I was a kid, my banker grandfather used to give me government savings bonds for Christmas in a boring blue envelope. I loved him but privately I was pretty convinced he had forgotten what a “present” was.
The message he was sending was not particularly flashy or in line with typical holiday marketing. The idea that Christmas is about overspending because overspending is love is so ubiquitous we barely notice it anymore.
To add to the problem, we are told that going into debt to pay for Christmas is no big deal. It is easy to find a lender, too, but most of them are bad news. A payday loan store near where I work offers a 14-day holiday loan with annual percentage rates up to 664.29 percent — a ridiculously high number that is not unusual. At this APR, after two weeks a loan of $2,000 has to be paid back at around $2,510, and a $5,000 loan for a year means paying back $38,000.
Although some Texas cities such as Houston and San Antonio have passed laws limiting predatory lending practices, larger reforms have not been forthcoming, and so it is still up to consumers to resist.
Unfortunately, the lender marketing push is huge. In fact one particularly embarrassing loan website told people, “In the end you would not want your kids to know too much about your poor financial situation, especially when their friends are to get lovely gifts.”
Yuck. Credit cards also engage in heavy marketing now and can lead down the same road, albeit more slowly. Debt is not a small problem: According to Nerdwallet.com, U.S. households currently have a combined debt of $11.85 trillion.
Contrast these seductive messages with what it is actually like to be financially unstable. In short, it is as stressful as it gets. We all know this, and we know that financial troubles tend to get worse over time.
There are ways to get and stay financially ahead, such as committing to save a little bit of each paycheck, to pay off the credit card bill every month, etc. But it is much more common for people to commit to compounded debt interest that can drag on for years.
This holiday season we need to look at spending differently. We need to look at financial security as a gift. More people ought to institute saving and security as gifts for one another. Either don’t spend any money if there is none to spend, or spend a little bit on something to make things financially better.
Investment in a 509 college saving plan, opening an index fund with automatic deposit every month, buying more life insurance, all of these are much more important and meaningful gifts than are more material things that we may or may not use. Even a paid-off credit card bill, tied up in a shiny bow, doesn’t sound very sexy, but it is a great present to give to a worried spouse.
When I think back to those savings bonds my grandfather gave me and how 10 years later I was able to cash them for double what he paid for them, I remembered how I felt. They let me know that someone was worrying about my future and wanting me to be safe, and the process of owning them showed me that security sometimes means choosing payoffs later instead of now.
As a marketing professor, I guiltily wonder about where the marketing to spend and borrow will lead us as a country. I wish that when New Year’s rolls around, people would feel more hope, not less, from how they behaved financially during the previous month.
So, I hope more consumers this year break out some comforting envelopes and fill their gifts with great financial investments. You can always tape a candy cane to them and open them while drinking hot chocolate, talking about what they will bring later. Your kids might think you are crazy, but later they will know, as I did with my granddaddy, that you cared enough about them to make the year better financially. It will be a nice memory.
Julie Irwin is a professor of marketing in the McCombs School of Business at The University of Texas at Austin.
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