I have two young boys. Historically around Christmas, our tree would be loaded up with toys. Unfortunately, it is dubious to know if these gifts are creating lasting happiness.
Gifts get underutilized
Last Christmas I bought several Lego sets for my boys. They seem to really like Lego toys. What is the problem? In today’s world, there are so many things vying for their attention. They love to watch YouTube, play video games, engage in Taekwondo, or swim at the pool. As a result, I still have Lego sets from last year unopened (I will be wrapping these and regifting them this year).
Many of their toys sit around the house and collect dust. These toys were very exciting for about 20 minutes and now they are disregarded. While I am in the process of decluttering, this is not great since clearly our family is wasting resources and impacting the environment for something that adds negligible value. I drop these toys off at the local preschool or the Goodwill, hoping that other children will be able to benefit from them.
The economics of gift-giving is weak
We tend to value gifts given to us much less than things we buy with our own money. A survey recently showed that we value gifts 20% less than cash. Meaning if someone spends $100 on a gift for me, I only value it at $80. I would have been happier to receive $100 and spent it in my own way. This makes sense because another individual can’t possibly know what would bring me satisfaction more than myself.
From an economics perspective, the best way to maximize happiness would be to not give gifts but instead, opt for cash or gift cards to individuals.
Christmas has morphed into a consumerist ritual
Society wants you to blow a lot of money on Christmas. There are armies of special interest groups including toy manufacturers, retailers, fashion designers, greeting cards, electronics manufacturers, etc. They want you to spend money. If you don’t have money to spend, they want you to go into debt and spend money that was loaned to you.
The idea here is to shame people into spending. If you don’t buy your children thousands of dollars in gifts, then clearly you do not love them. They are missing out on their childhood. You must buy your loved ones stuff or else you don’t appreciate them!
What is the alternative
This year, my family will be taking a different approach. I will buy almost nothing. I have spent about $120 – $150 on gifts that I believe will create pleasure. I have taken several unplayed board games and I will be rewrapping them and putting them under the tree. This is a victory in my mind because either my kids won’t remember they got them last year or they will and it will be a great reminder that they should use them. We will have minimal gifts and there won’t be a lot of clutter. I purchased them a museum membership as experiences tend to provide more happiness than material things.
To make this Christmas more useful I will be putting more money in my children’s 529 college saving plan. This will compound over the next decade and provide a bright future. We frequently track their college savings balance and helps them think about the future.
I am also a fan of handmade gifts and crafts. For their grandparents, I have scanned their paintings and reprinted them into a photo frame that they can hang up. Gifting a handmade gift is a thousand times better than just buying something off a store shelf that was imported from China.
Surveys have shown people say they are still stressed from debt obtained from Christmas the year before. Most western nations will be filling their houses up with consumer goods this Christmas and digging themselves into debt that will cause them significant stress in the future. Instead, I’ll focus on taking time off work and spending time with my family, maximizing our happiness and minimizing our stress.