Putting Santa on a Budget

Editor's note: This story has been update since it originally was published in 2009.

My friend Pat knows that her 12-year-old daughter, Jeannie, will probably ask for iTunes gift cards for Christmas. And that’s just fine with Pat. After all, Jeannie has already done the heavy lifting: She saved $280 over five months to buy an iPod Touch.

Instead of waiting for someone to give her an iPod as a gift (which might have taken a while), Jeannie started saving her babysitting money last summer. And she used two of my favorite savings strategies: She wrote down her goal, which made it more real, and taped the label to a glass jar where she could watch her savings pile up.

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On the other hand, Pat says that Jeannie’s brother, William, is “an astute manager of wish lists” in order to maximize his gifts from family members. A couple of Christmases ago, he asked what everyone’s gift-giving budget was -- including Santa’s -- so that he could figure out how to divvy up his list.

Give William credit for being an astute manager (or a clever operator). But knowing that everyone had a budget -- and that he had to stay within it -- was also a valuable lesson. When little sister Jeannie wanted to know why Santa needed a budget, Pat told her it was because Santa was facing high demand and had limited resources.

With the holidays upon us, and with recession-scarred families still watching their pennies, families can learn a lot from Pat, Jeannie and William, and from other readers of this column.

Don’t feel obliged to buy your children everything they want (or feel guilty if you can’t afford something because you’re worried about your finances). If a toy or gift isn’t in the cards, let the kids know upfront. They’ll go along with your rules and your wishes as long as you make them clear and stick to them. If they have to go without -- or pay for something on their own -- it not only helps your pocketbook, but it also helps them develop a sense of personal responsibility. “Jeannie is really excited and proud of herself,” says her mom.

Use wish lists to your advantage. Children need to learn to make choices, and what better tool to teach them than their annual holiday wish list? Once they’ve made their list, have them pare it down to, say, the top five things they want most. Or take a tip from William and give them a dollar amount that they can’t exceed.

Get Santa on your side. You can put him on a budget, as Pat did, or come up with another creative comeback when kids hit you with the line, “I’ll just ask Santa for it.” Tell them that you and Santa are a team, and he’s not about to go against your wishes by bringing a gift that you think is too expensive, too dangerous or not in sync with your family’s values.

Move beyond money by encouraging your kids to consider alternative holiday gifts. You (and they) could give thoughtful presents of time or service—such as taking over a sibling’s chores for a month, or offering to show Dad how to use his new iPod, which my son did last Christmas.

I loved this suggestion from a reader: “One of our favorite gift ideas involves scanning scrapbook photos from older relatives, or simply taking our digital camera to their house and photographing pictures in their fragile old albums. We then mount the pictures in inexpensive frames. The final cost per gift is $20 or less, and for that price you have a treasure forever.”

Teach the joy of giving. One reader frets that her 6-year-old daughter gets too many presents because her extended family has a “somewhat ridiculous” tradition of requiring everyone to give gifts to all the children younger than 13. “How can I explain to her that Christmas is about giving to others, not just people giving gifts to her?”

Explaining anything to kids that age is tough. It’s much easier to get your point across with a hands-on experience, such as helping them buy a gift with their own money and deliver it to a family shelter, day-care center, charitable organization or any other place that they can interact with other children who would appreciate both the gift and the thought behind it.

In this case, if you can’t talk family members out of their “somewhat ridiculous” tradition, how about encouraging them to contribute to a college-savings account or even a U.S. savings bond? And encourage your daughter to acknowledge each gift with a verbal thank-you -- or, better yet, a written note.

P.S. Please feel free to share your own strategies for putting Santa on a budget in the comment box below.

Follow Janet’s updates at www.twitter.com/JanetBodnar

Janet Bodnar is editor-at-large of Kiplinger's Personal Finance, a position she assumed after retiring as editor of the magazine after eight years at the helm. She is a nationally recognized expert on the subjects of women and money, children's and family finances, and financial literacy. She is the author of two books, Money Smart Women and Raising Money Smart Kids. As editor-at-large, she writes two popular columns for Kiplinger, "Money Smart Women" and "Living in Retirement." Bodnar is a graduate of St. Bonaventure University and is a member of its Board of Trustees. She received her master's degree from Columbia University, where she was also a Knight-Bagehot Fellow in Business and Economics Journalism.