There is joy in giving, especially among loved ones. Yet spreading joy to others needn’t mean sacrificing your own in retirement.
Retailers expect Aussie to spend $73.1 billion in the lead up to Christmas 2025, up 4.2 per cent on the same period last year. That includes $11.8 billion on gifts – an average of $707 each.
That’s big dollars by anyone’s calculations. For retirees, the costs can be even bigger, given the potential impact on their superannuation and other retirement income.
Thankfully, though, you don’t have to resort to being Scrooge to safeguard your savings this Christmas.
Avoid the debt trap
Perhaps the worst thing you can do is fund Christmas on credit. By now, you’re (hopefully) aware that credit accrues interest if not repaid on time, plus the convenience of tap and go is woeful for visibility over your spending.
It’s much easier to stick to a Christmas budget by withdrawing the amount in physical cash. You can see the wad of notes dwindling in real time, and once it’s gone, that’s it.
Steer clear of Buy Now, Pay Later and Interest Free plans too – again, there is hefty interest and additional penalties if you’re late making repayments. Furthermore, that debt could become troublesome if your circumstances change (such as your health deteriorates) and you can no longer afford the repayments.
Only draw down what you need
If you’re already retired, it can be tempting at this time of year to draw down one large lump sum from super to “cover the costs of Christmas”. But there are two problems with this approach:
· Every dollar you withdraw loses the compound earnings it would have otherwise earned.
· You’re unlikely to replace any leftover money, meaning it gets squandered.
As such, only draw down what you need, as you need it. Even better, if you can, pay for Christmas out of your everyday cash and leave your super balance untouched.
Share the hosting duties
A big celebration with all the kids and grandkids at your home may sound amazing, but it doesn’t come cheaply or easily if you’re footing the bill and doing all the work.
The total cost could easily run into the thousands when you add up all the food, drinks, decorations, gifts, preparation, and cleaning up.
To put that into context, let’s say hosting a full Christmas spread costs $2,000. If that money had been left in your super earning an average return of 8 per cent, it would have been worth an extra $4,317.85 after 10 years.
Host a Secret Santa
Secret Santa isn’t necessarily the sole domain of work Christmas parties – it can be a fun activity for family gatherings too.
Additionally, it brings huge time and money savings by freeing you all from having to buy something for everyone – especially if you have a large family.
Some families make it an adults-only Secret Santa, so you can still spoil your grandkids and potentially get a bit more adventurous with the gifts exchanged among the grown ups.
Be charitable
I’m a big believer in charitable donations as gifts (especially at Christmas, the season of giving) because everybody wins:
· The recipient whose name the donation is in enjoys knowing that a cause they cherish has received support.
· The charity benefits from much-needed financial assistance to fund its activities.
· The giver can claim a tax deduction for donations over $2, offsetting part of the cost.
It could be a health, community, sporting or cultural charity – anything that has real significance to the person you’re giving it to.
Think value, not “stuff”
Especially if you’re already retired or part-retired, you’ll have more time to make gifts yourself instead of buying them.
Hand-crafted wooden toys from pop’s shed, favourite sweet treats using nan’s own recipes, potted plants grown from cuttings from your garden … these gifts come with the added sprinkle of nostalgia and memories as well as physical utility, making them more special as well as kind on your retirement nest egg.
(You can also encourage your family to give handmade gifts in return, so you all share the experience and save money in the process).
Don’t talk money
Money is a sensitive subject for most people, so it’s generally best to avoid discussions about it at the Christmas table.
Such a ban means you can have financial discussions:
· in a more level-headed time and place
· free from alcohol or tiredness from long-distance travel
· when your accountant and financial adviser aren’t away on holidays
· without being pressure to dig into your nest egg in the name of “getting in the Christmas spirit”
So, leave discussions about things like inheritances, acting as Bank of Mum and Dad, or contributing to grandkids’ school fees until after the holidays, and focus on enjoying the food, fun and frivolity of the festive season!
Helen Baker is a licensed Australian financial adviser and author of the new book, Money For Life: How to build financial security from firm foundations (Major Street Publishing $32.99). Helen is among the 1% of financial planners who hold a master’s degree in the field. Proceeds from book sales are donated to charities supporting disadvantaged women and children. Find out more at www.onyourowntwofeet.com.au
Disclaimer: The information in this article is of a general nature only and does not constitute personal financial or product advice. Any opinions or views expressed are those of the authors and do not represent those of people, institutions or organisations the owner may be associated with in a professional or personal capacity unless explicitly stated. Helen Baker is an authorised representative of BPW Partners Pty Ltd AFSL 548754.
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