Why Some Economists Say You Should Give Cash Instead of Gifts

Toni Husbands — Mon, 11 Dec 2017 10:00:07 +0000

If Christmas shopping gives you the blues, and you labor over the thought of selecting the best gifts to no avail, you now have permission to stop. That's right. "Scroogenomics" may provide the peace of mind you seek during this festive, gift-giving season. In this retelling of Charles Dickens' classic tale, the lesson is to give generously, but not the type of stuff that typically ends up wrapped in paper and bows. Cash is king in this version, and other types of gifts are deemed a waste of time and money. (See also: 10 Fun Ways to Wrap the Gift of Cash)

The reality behind "Scroogenomics"

Economist and University of Minnesota professor Joel Waldfogel coined the term in his 2009 book, Scroogenomics: Why You Shouldn't Buy Presents for the Holidays. The reason behind Waldfogel's anti-gift stance isn't because he dislikes his friends and family. He simply believes giving gifts is a colossal waste of money. In fact, he calls gift giving an "orgy of wealth destruction."

Waldfogel suggests that we waste our money by buying the wrong gifts, completely underwhelming the recipient with stuff they don't even want. For the unimpressed giftees among us, the thought actually doesn't count.

According to Waldfogel's theory, we alone are the best judge of the products or services that bring us joy. Gift givers often miss the mark, thus gifts go underused and money is wasted. Waldfogel argues that gifts are best received when given to children or people that we know very well. "With everyone else, we might be better off giving cash or gift cards," he writes. (See also: How to Get Rid of Your Unwanted Gifts and Make Money Too)

The solution: Give cash

Before you dismiss Scroogenomics as a cynical case of bah humbug, consider this. Annie Leonard, co-writer of the short film The Story of Stuff, shares that only 1 percent of the materials we use to produce consumer goods (including the items themselves) are still in use six months after purchase. That doesn't mean that 99 percent of those goods end up in the landfill. It does mean that 99 percent of the planet's resources that were consumed in the making of those goods were. Not only is your unwanted and underappreciated gift a big waste of money — it's a colossal waste of the world's resources.

According to the National Retail Federation, American consumers will spend an average $967 on holiday gifts this year. If the vast majority of those gifts are just going to waste, wouldn't giving cash be a more appropriate use of your time, energy, and hard-earned resources? And considering the NRF found that 61 percent of recipients would actually prefer some type of gift card or certificate instead of an object, there's even less reason to believe that "stuff" is the ticket to a well-received present.

Cash as a gift tends to feel less exciting and tangible these days, since money transfers can be done with the click of a button or through a smartphone. But, giving cash also doesn't have to include forking over a manilla envelope stuffed with bills. Your thoughtful cash gift can take many forms. For example:

Donate to a charity on behalf of a loved one. Think about a cause near and dear to the recipient's heart and share the gift in their name. Your donation is also tax deductible, so this gift is a win-win-win (be sure to save the receipt!). The environment will thank you, too. (See also: 8 Charities You Can Trust With Your Holiday Donations)
Open a savings or investment account for the recipient and stock that full of cold hard cash. This is the gift that literally keeps on giving. Can you say compound interest?
Earmark the money for an outing or travel excursion that you and the recipient can plan together. These are memories that will last longer than the stuff destined for a landfill near you. Plus, who wouldn't love a free trip?

If your need to experience the warm fuzzies of gift giving won't allow you to simply give cash, compliment your cash gift with a craft. A money tree made of dollar bills or a folded-bill chain combine the joy of making something for your recipient, with the utility of giving cash. This way, everyone can enjoy the holidays and get exactly what brings them joy. (See also: 10 Reasons Why You Should Ask for Cash This Christmas)

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This article is from Toni Husbands of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

7 Ways to Deal With Unwanted Gifts

Andrea Karim — Fri, 21 Dec 2012 11:24:31 +0000

Everyone has received at least one horrible or laughably useless gift. But what should you do if you receive a gift that you don't want or can't use? Here are seven ways to deal with gifts that don't meet your needs. (See also: Wise Bread Gift Guide: Gifts That Save You Money)

1. Refuse

OK, this is really more of a pre-emption, and it's a tricky option, but a valuable one. If you have the opportunity to politely turn down an unwanted gift before receiving it, then you can stave off the hassle of finding a new home for it later. If your giver is an understanding type, you can simply describe how you are trying hard not to acquire new stuff in your home. Make sure to express appreciation for the gift (or at least, the thought behind it!).

2. Return

If your giver was kind enough to provide a gift receipt, then you don’t have to do much explaining. Just take the gift back to the store and return it or exchange it for something that you want or need. You can even return or cash out most major gift cards.

3. Regift

Some gifts are useful specifically because you have the option to give it to someone else. Perhaps that skull-shaped vase isn’t really your cup of tea, but you know a person with more eclectic tastes that would love it.

Regifting can be tricky — if both the person who gave you the gift and the person you are regifting it to happen to know one another, then honesty is probably the best policy. Explain to your giver that you know someone who would be incredibly jealous of the gift and ask if it would be OK to regift it.

4. Resell

If the gift is of any monetary value and you can sell it without your gift-giver finding out, then by all means, earn some cold, hard cash on eBay or craigslist. Check out this article on where to sell common household items. You can even sell Groupon coupons.

5. Repurpose

So skinny jeans are in, but your aunt thought you’d like a pair of extremely flared jeans. If you can’t return them (and can’t bear to wear them), alter the jeans. People still wear jean shorts in the summer, don’t they?

6. Refinish

Sometimes, a gift just needs a new coat of paint to make the grade. Chairs can be recovered, furniture refinished, clothing dyed, posters reframed, and brass chandeliers spray painted a brilliant shade of pink and hung in a funky bedroom or dining room. If you’ve received a well-used (or simply ugly) gift that has good bones (and you’re feeling a bit crafty) consider finding ways to shine it up and use it before getting rid of it.

7. Recycle

Donating unwanted things to Goodwill or any charity of your choice is a win-win. Non-profit organizations are able to fund their operations, and you get a tax deduction for charitable donations. If the unwanted gift is incredibly unique, make sure to donate it to an organization where the giver won’t see it!

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This article is from Andrea Karim of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

unwanted gifts

Why Some Economists Say You Should Give Cash Instead of Gifts

The reality behind "Scroogenomics"

The solution: Give cash

Like this article? Pin it!

7 Ways to Deal With Unwanted Gifts

1. Refuse

2. Return

3. Regift

4. Resell

5. Repurpose

6. Refinish

7. Recycle

Like this article? Pin it!