Stop buying presents right now: by order of the economists

Economists explain why cash is always better than last-minute gifts

Give money as Christmas presents

You can stop rushing around trying to buy last-minute gifts, because the experts have spoken, and it turns out that this is the worst possible way to approach Christmas. All you need to do is pop to the cashpoint, and bring out the crisp notes on Christmas morning.

See also: Why people always give unsatisfying gifts

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See also: Why you need to give cash for Christmas


A study at Yale University, by Joel Waldfogel, concluded that it was a waste of money giving people presents at all. His argument basically boils down to the fact that the one person who we really know is ourselves. If we buy presents based on what we know about other people, we're not going to do as good a job as they would themselves. It therefore makes sense just to hand over the cash instead.

This would seem to be supported by an ING International Survey on Christmas spending, which found that of those people who received a Christmas gift last year, nearly a quarter either received a present they didn't want, or couldn't use (15%) or couldn't remember how they felt about their gifts (8%).

However, we don't tend to give cash gifts. The same survey found that one in five of all people surveyed received a cash gift last year, while 16% received a gift card. People tended to receive practical and leisure items instead.

Why?

This, argues Ian Bright, a Senior Economist, at ING, is likely to be because the measure of a gift isn't just economic: there is also 'social capital' you and the recipient receive if you buy them a great present. He explains: "There is positive value in giving a gift that is appreciated, more so than just giving cash. When we give a gift that the recipient appreciates, we both gain."

The flip side, is that, "If we give a gift that isn't appreciated, we risk damaging our own self-esteem and our relationship with the recipient. Effectively, we take a risk because while it might not be economically efficient, when we get it right, it's socially rewarding." Fortunately, the research shows that 78% of people who receive gifts appreciate them, so there's a high probability that the risk will pay off.

Why not?

There is a caveat to all of this, however, you have to ask whether the gifts you are snapping up so late in the day are really the kinds of well-thought-out presents that will be appreciated and bring all that lovely social capital. If you have been planning it all year, but have struggled to get to the shops before now, then it seems like buying a gift is a risk worth taking.

If you are rushing around like a headless chicken snapping up anything that looks vaguely festive, then there's a much bigger risk that you buy the wrong thing, eroding social capital, and possibly even damaging your relationship with the recipient.

Surely in that case, you would be far better offering them the cash. This has the added benefit that you have complete control over how much you spend, and you're not tempted to blow the budget.

But what do you think? Do you like to get cash for Christmas? Do you prefer to give presents? Let us know in the comments.

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