How the pinch steals Christmas

Pinched pocketbooks can have many people feeling more Grinch-like than a Jolly Ole St. Nick vibe this holiday season.

A recent survey from CPA (Chartered Professional Accountants) Canada found gift budgets this year are going up 10 per cent over last year to reach $661 on average. That’s not counting all the other costs — food, travel, entertainment — that also swell in December.

Bank of Canada inflation data shows prices are 20 per cent higher than pre-COVID-19 pandemic, and Statistics Canada data points to the average wage growing less than $2 to reach $35.20 an hour.

The CPA study found a growing number plan to use credit, 49 per cent, up slightly from last year. That is relatively in line with Bank of Canada data showing 46 per cent of Canadians typically carry a balance on their credit cards, says Li Zhang, financial education advocate with CPA Canada. “That balance will probably be bigger after the holidays.”

The pressure to spend is higher among Gen Zs, CPA Canada’s study adds. Nearly 60 per cent of the 18- to 34-year-old age group plan to use credit, with the implication being they may not be able to pay the full balance, Zhang says — and that stresses many of them out.

For the younger adults feeling a pinched pocketbook is stealing Christmas jubilation, welcome to the club. The holiday season doesn’t get cheaper with age.

That said, the survey found the stress levels do drop as grey hair increases, in part because most older individuals have the savings and cash flow to pay the holiday bill.

If financial stress is present when purchasing presents and other yuletide fare, it’s not too late to have discussions, particularly with your children about budgets, limits and trade-offs, says Lucianna Adragna, vice-president at RBC.

“It’s a great time to talk about budgets and setting goals,” she says, noting many kids come up with wish lists anyway at this time of year.

Having a talk might be overdue, given the findings of an RBC poll of parents from last month. It reveals 53 per cent worry their teenage and young adult children won’t manage money well.

“If you’re not having a conversation, then this season just exacerbates problems,” Adragna says.

She adds the survey found many parents worried about their kids’ financial futures are equally worried about their own finances.

As the CPA study alludes to, many young adults may already be making missteps given the propensity to borrow with credit cards. Chronic overspending on credit can set them up for future challenges buying a car, renting an apartment or purchasing a first home.

A recent study by Capital One found many Canadians aren’t up to speed on their creditworthiness, revealing about half are unsure of how credit scores work.

Head of credit and data Becca Mintz at Capital One says credit cards are a double-edged sword.

On one edge, they’re convenient; you can even earn reward points that one day might amount to something valuable and you build a credit history. A track record of borrowing and paying off debts in a timely manner creates a strong credit score that can lead to getting better interest rates on mortgages, she adds.

But credit cards often cut with their other edge.

High interest costs sting if you’re unable to pay the balance. Just making the minimum leads to the debt growing every month and that negatively impacts your credit score.

“What makes me even more nervous are credit myths that many people believe,” Mintz says.

Those include the idea of spending to your limit improving your credit score. In reality, it doesn’t; rather it can lower your score. Another is a misbelief buy-now-pay-later programs have no impact on scores — but these loans actually do count against it, Mintz adds.

Overall, too much debt increases the likelihood of missing payments, which can deeply impact credit scores, she says.

“My biggest advice is to have a spending plan,” Mintz says, noting even as of early December, ‘it’s never too late to set limits.”

Of course, easier said than done; the pull to spend is strong at this time of year. In the United States alone, hundreds of billions are spent on holiday marketing. Last year, it was estimated at US$397 billion. Much of it attempts to bypass the rational mind and mainline our emotions.

“It’s hard even for those of us steeped in financial literacy,” Zhang says. “I’m not immune to it.”

It’s a month-long fight raging in a consumer’s brain: cortisol versus dopamine.

Marketing pushes the joy button with each purchase releasing the neurotransmitter dopamine, associated with pleasure. In contrast, the stress of budget stretching, and meeting gifting and entertaining obligations, releases the hormone cortisol.

Overspending can ensure the stress chemical will continue to remain high long after the dopamine-drenched holidays are gone.

Consider that much of the spending will not amount to much appreciation in the long run, Zhang says. “I used to buy presents for all my friends, but it got to a point where I realized, ‘Everybody’s buying each other crap they don’t need.’”

Instead, she suggests grasping hold of the six-decade-old anti-consumerism messages of two of the most beloved holiday TV specials, notably How the Grinch Stole Christmas! and A Charlie Brown Christmas.

Charlie Brown’s producer once told Time magazine the half-hour special was “about turning your back on all the shopping and buying.”

The message still resonates.

That said, the same producer also noted the irony of plastic toy versions of the pathetic Charlie Brown show tree — which symbolized a less-is-more message — being mass produced and sold in stores.

Go figure.

Joel Schlesinger is a Winnipeg-based freelance journalist

joelschles@gmail.com