SOURCE: BMO Harris Bank

BMO Harris Bank

December 13, 2013 08:00 ET

BMO Harris Bank Study: Half of Indiana Families Willing to Spend Beyond Holiday Budget

INDIANAPOLIS, IN--(Marketwired - Dec 13, 2013) -

  • Three quarters of Hoosier families have holiday budget, but more than half will spend beyond it
  • BMO Harris Bank offers tips for keeping spending and debt in check

A new survey released today by BMO Harris Bank shows that while 76 percent of parents in Indiana with young children have a holiday spending budget, 53 percent expect to exceed it. Impulse buys may be one contributing factor since over 55 percent of respondents say they make unplanned purchases during the holiday season.

The inaugural holiday spending report from BMO Harris Bank, which surveyed parents with children under 10 years old, found that in Indiana:

  • 37 percent of parents approach the holidays with a fixed budget, and 39 percent say they are flexible
  • 21 percent of parents have not created a budget for holiday spending at all, which is higher than the national average of 13 percent
  • Over half make impulse purchases during the holiday season
  • 24 percent of parents, say they regret how much they spend come January, much lower than the 37 percent national average

"The time between Thanksgiving and New Year's is a tough time to stay on a budget and having children makes it even tougher, but going into the holiday season with a budget and having the discipline to stick with it is important," said Tim Massey, Indiana Regional President, BMO Harris Bank. "Taking on debt can lead to holiday hangover after the first of the year, so families need to consider the consequences of purchases on future finances."

The survey found that the primary reason parents said they are willing to go into debt is a lack of disposable income for everything they plan to purchase (89 percent), notably higher than the national average of 52 percent. A fifth (19 percent) said they're willing to take on debt because they expect to make it up in the New Year. Forty-six percent said the social pressure to spend and celebrate during the holiday causes them to take on debt.

Nationally, the survey reported that:

  • 38 percent of parents have a fixed budget, and 47 percent say they have a budget that is flexible
  • Only 13 percent of parents have not created a budget for holiday spending at all
  • 58 percent of parents expect to make impulse purchases during the holidays
  • The 'holiday hangover' affects 37 percent of parents, who say they regret how much they spend come January

Michael Gregory, Head of U.S. Economics, BMO Capital Markets, noted that after several years of curbing their credit appetites, households finances are now in much better shape. Combined home mortgages and consumer credit peaked near 124 percent of after-tax incomes at the end 2007 and the ratio finally slipped below 100 percent at the end of 2012, where it seems to be stabilizing.

"Having gone through this multi-year restructuring, it's important that consumers maintain healthy balance sheets by using credit cautiously, making sure their payments fit well within their family budgets not only at current interest rates but should borrowing costs rise in the future," Mr. Gregory added.

Visit the BMO Harris Bank Learning Center to learn more about holiday budgeting and tackling debt and other tips for managing your expenses, including:

  • Cut the Extra Trimmings: Keep an eye out for the inevitable sales that come out around Black Friday, Super Saturday and Cyber Monday. Suggest doing a gift exchange rather than getting presents for each person
  • Use Tools to Stay on Track: BMO Harris Total Look is an online tool that lets you set spending and savings goal and keeps track of where your money is going
  • Plan Your Travel: If you're flying to see family, book early or be flexible with your dates and times to get the best deal. Or, consider a "staycation" and spend the holidays in your hometown
  • Pay off Debt Early: Make more than the minimum payment on your credit card debt, which will knock down the amount of interest you'll pay over time. This will also help to free up credit, which can improve your credit score.

The BMO Harris spending survey was fielded online by Pollara between November 22nd and 29th. In total, 993 parents with children under 10 were interviewed, including an oversample of 99 from Indiana. Results for a probability sample of this size would be accurate to ± 3.1%, 19 times out of 20.

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