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ornamentOne of the fascinating aspects of human societies is how people are driven to create holidays that involve mandatory transfers of wealth. We’re heading into the insanity of the many year-end holidays celebrated by different groups in the United States. One of the financial questions raised by this is, how big a problem is overspending and the holidays?

Obviously, it’s enough of a problem that scads of personal finance blogs offer advice on how to manage your spending better during this season. T. Rowe Price released the results of their annual Parents, Kids, and Money Survey. When it comes to the issue of holiday spending, they found some alarming results: 62% of parents say that they spent more money on presents for kids than they should have; 7% of those surveyed have tapped retirement savings for holiday money. Ouch!

I get it. Many, many years ago, I was afraid to ask for the Barbie Townhouse because it was so ridiculously expensive, but I got it anyway and it made my very happy. I’ve also been on the other side, seeing something that is absolutely perfect for my kid and buying it, even though it puts me a little over budget.

Taking money from a retirement fund is a bad idea, though. The tax penalties can be huge, and it sets you back. That’s the most costly money to tap.

The study found that 9% of families tapped their emergency funds, although I’m not sure that’s a bad thing. To a certain extent, an emergency fund is an alternative to using a credit card when things get tight, and that makes the holidays an appropriate use of the money – not the best, but not the worst.

Among other findings, mothers have better holiday saving habits than dad. Fathers are more likely to use retirement funds (11% vs. 3%) and their emergency fund (11% vs. 6%) to cover holiday spending. Mothers are more likely than fathers to save for the holidays throughout the year (40% vs. 32%).

In addition, 30% of the parents who aren’t saving regularly for retirement are saving regularly for the holidays. Now, the holidays may come but once a year, but they come every year, so saving for them is a good idea. Retirement may be less of a sure thing, but it will be a lot more expensive. Furthermore, in forty years, your kid will not view the Millennium Falcon as compensation for having to you move in.

My own feeling is that it’s better to splurge on the one thing you know your kid wants than to spend a lot of money to have a lot of presents that are not really valued. Also, kids can understand if a given year’s presents will be less than in other years. What they most value is having fun with their families, and a lot of family fun is free. Don’t touch your emergency fund – let alone your retirement – without researching some fun and cheap ways to celebrate the holidays at your house.