How Much Should You Spend on Gifts for Kids?

How Much Should You Spend on Gifts for Kids?

When party invites start piling up, it may be one of the only times you wish your child weren't so darn popular.

That's because the hardest things in life to budget for are the ones you don't see coming—like ten birthday parties in a single summer—or ones you don't know exactly how much you should spend on: i.e., should you really shell out to buy your daughter that XBox?

After all, she only turns eleven once.

And while you may know your monthly housing and car payments cold, gifts—which involve etiquette and emotions—are a whole different animal. (Below, we'll explain the dangerous-to-your-budget phenomenon of "gift creep.")

How Much Should You Spend on Gifts For Your Kid?That's why we thought it would be helpful to take a closer look at how much you should spend on other people's kids ... and your own. Including three signs you're currently overspending on presents.

How Do You Teach Your Kids About Money?

Do you let your kids in on how you budget for things? Do you have a separate part of your budget that you reserve for money for gifts?

At LearnVest, we recommend a smart budget be broken down to look a little something like this:

  • 50% spent on essentials, to include mortgage or rent, groceries and health care
  • 20% spent on priorities, to include your emergency fund, 401(k) contributions and any debt repayment
  • 30% spent on "choices," which includes everything from cells phones to your internet service and eating out, vacations, entertainment and even ... you guessed it ... gifts that you'll be purchasing throughout the year

A Good Rule of Thumb for Gift-Giving

As a rule of thumb, plan to spend between $10 and $20 for regular classmates, and between $20 and $25 for your child's closest friends. While your kid probably won't be attending a party or buying a gift for every single kid in her class, you can guesstimate how many parties she will probably be invited to. Even if others spend more than that on your child, don't feel pressured to match dollar-for-dollar if it's not in your budget.

(We talked about that and other birthday etiquette questions in our interview with etiquette maven Lizzie Post--yes, great-great-granddaughter of Emily.)

As for how much to spend on your own kid, there's no magic number. When you're considering how much to factor into your budget for your own kid's gifts for the year, take a few things into consideration:

  1. How often do you purchase gifts for him or her throughout the year? If you're more likely to get him a few smaller gifts year round, then there's no need to drop a large wad of cash on a gift just for a birthday. Try to stick to one number in your budget for the whole year's gifts, whether that means spreading it evenly throughout 12 months, or spending the majority of it on a birthday or at the holidays.
  2. How old are they? As they age, your kids can have more choice about how they'd like to celebrate their birthdays. Once they're in school, you can probably start to involve them in the process of choosing whether they'd rather have a nice party, get a bigger present or do something fun with the family for the day.

To help you stick to a budget, and to make sure you have enough to cover the fun stuff for your child, see if your bank allows you to set up savings account subcategories (ING Direct, Smarty Pig and Ally Bank are among those that do, but first check with your bank or credit union to see what options there are).

Once you know how much you need for the year, put aside a certain amount each month for kid gifts, that way you won't face sticker shock when the actual birthday comes around. You can also link your accounts to LearnVest's My Money Center and create a budgeting folder specifically for gifts, so you can easily track how much you tend to spend in certain months, giving you a better handle on how to budget next year.

'Gift Creep': What It Is and Why We Hate It

So there's this thing called "gift creep," and trust us, it's real. It's the feeling that giving your child just one gift is somehow not enough, since other kids are getting so many (we talked about the idea of party creep here). "There is no ideal number of gifts to buy for your child," says Frank J. Sileo, Ph.D, a licensed child psychologist in New Jersey.

Some families celebrate (and buy gifts for) many occasions throughout the year, while others opt to purchase one larger gift during the holiday season or on birthdays. Do whatever works best for your family and your budget.

Signs You Should Scale Back Your Gift-Giving

Although every family is different, there are certain instances in which you should scale back, even if your gifting usually revolves around just one big gift each year. Consider scaling back if:

  1. Your child makes constant demands for more stuff
  2. Your child has meltdowns when she hears the word “no"
  3. Your child has become so accustomed to getting a present for every single occasion that she doesn’t appreciate what she already has

“We send the message that money grows on trees when we overindulge,” says Dr. Sileo. “Kids should be taught about budgets and limits, and that you don’t get something just because you ask for it.” Another way to do this is to put the focus of birthday celebrations on spending time together rather than getting a big box with a bow. If this something you've been struggling with in your own life, here's how to know if you're spoiling your child.

Dealing With a Letdown

While it might upset your kid that she's not getting the Xbox she really wanted, some years the big-ticket items on our children’s wish lists just don't work for your finances. Dr. Sileo recommends explaining your gift budget to your child, and working together to come up with fun things she might enjoy that fit within it. Talking to our kids openly is a key component to making them smart about money. For more ideas on how to talk to your kids about money, check out the nine things financial advisers teach their kids and the money milestones you can teach your kid at every age.

Meanwhile, if your child seems disappointed by a gift you gave him, use that as a teachable moment, says Dr. Sileo. The problem is not that he experiences feelings of disappointment and hurt, which is normal, but that he hurts you, too, by reacting in a rude or ungrateful manner. Explain that even if you're upset by a gift, it's the thought the counts, and most times people put a lot of thought into the gifts they give you. In the end, it's important for your child to know that a thank you is always necessary, even if he wouldn't have otherwise picked the gift out for himself.

How much do you tend to spend on gifts for your kids?

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