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Bah Humbug! Why You Shouldn't Buy Presents for the Holidays

Posted Nov 13, 2009 03:03pm EST by Heesun Wee in Investing, Products and Trends, Recession, Banking
Related: wmt, XLY, spy, jwn, tgt, jcp, XLP

It's two weeks until Black Friday, the unofficial start to the holiday shopping season, and already there's heated anticipation about blockbuster deals and big crowds.

But wait. Joel Waldfogel, a Wharton professor and author of "scroogenomics," argues gift giving is not productive for the American economy. 

"Through gift giving, it has a chance to miss the mark and not produce that much satisfaction for us," Waldfogel says, explaining that money we spend on ourselves is more economically efficient than money spent on gifts.

If a present or two that misses the mark seems harmless, consider that Americans spend a whopping $65 billion on holiday gifts annually. Research shows 20% of that total -- or $13 billion -- is wasted on useless or unappreciated gifts, Waldfogel notes.

Gift cards: Of course gift cards have gained in popularity. Avoiding the stigma of giving cash, cards account for roughly one-third of all holiday gifts. But not all cards get redeemed, resulting in more value destruction.

Charities: Ever the optimist, Waldfogel encourages consumers buy gift cards for charities -- money you know will be spent and circulated back in the economy. Don't know where to start? He notes sites such as Charity Navigator, that rates charities' effective use of donated dollars, akin to Consumer Reports for the non-profit world.

 

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