MINNEAPOLIS, MN and ST. PAUL, MN--(Marketwired - Dec 13, 2013) -
- Most families (88 percent) have a budget in place, but 60 percent often 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 a majority of Minnesota parents with young children have a holiday spending budget, more than half still go over their limit and a third expect to have 'buyer's remorse' after the first of the year about what was spent.
The inaugural BMO Harris holiday spending report, which surveyed parents with children under 10 years old, found that in Minnesota:
- 36 percent of parents have a fixed budget, and 52 percent say they have a flexible one
- 13 percent of parents expect to take on debt as a result of holiday spending
- 54 percent make impulsive purchases during the holiday season
- 36 percent say they regret how much they spend come January
"The end of the year provides a lot of opportunities to spend money including gift exchanges, teacher gifts, travel, and parties, not to mention gifts for our children and other family members," said David Lindstrom, Minnesota Retail Vice President, BMO Harris Bank. "If you do take on debt to pay for gifts, then make a commitment to tighten the family belt in January and create a plan to pay it down as quickly as possible."
The survey found that the primary reason parents are willing to go into debt is a lack of disposable income for everything they plan to purchase (78 percent), notably higher than the national average of 52 percent. Nearly a third (29 percent) said they plan to make up for it in the new year. One in three (31 percent) said the social pressure to spend and celebrate during the holidays cause 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
- 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 Bank 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 95 from Minnesota. Results for a probability sample of this size would be accurate to ± 3.1%, 19 times out of 20.