11 December 2024
Gifts, food, treats and trips away are just some of the extra expenses many households face every festive season on top of standard cost of living pressures.
With many people already experiencing mortgage or rent stress and suffering from the effects of high inflation, pressures are expected to intensify with Australian shoppers set to spend $11.8 billion this Christmas, up $1.6 billion on last year.
A financial expert at the University of South Australia is urging households to adopt proactive financial planning tactics to help them manage expenses and reduce the burden of bills this festive season.
Financial literacy is the ability to understand and effectively use financial skills including personal financial management and budgeting. A foundation of financial literacy – or a smart relationship with money – can support an individual’s savings or retirement goals, help with debt management and the running of personal businesses.
Professor of International economics, Professor Tony Cavoli, who is also a researcher for UniSA’s Research Centre for Markets, Values and Inclusion, says financial literacy enables people to plan better and spend smarter during the holiday season.
“It teaches skills like budgeting and tracking expenses, which can prevent overspending,” says Prof Cavoli. “Studies show that Australians who understand financial basics are more likely to set spending limits and stick to them, avoiding financial stress.
“Financial literacy also helps people avoid high-interest borrowing, like credit cards or buy-now-pay-later services, which can lead to big bills in the new year. It encourages choosing low-interest options or paying upfront whenever possible.
“Financially literate individuals know how to shop wisely by comparing prices and finding discounts, especially online. These skills can lead to significant savings during Christmas shopping.”
Roy Morgan data, commissioned by the Australian Retailers Association, reveals Australians have embraced the festive spirit early in 2024, with most shoppers (53%) already having purchased gifts as of mid-October.
16.7 million Aussies will be buying Christmas gifts in total this year, up 1% on 2023. On average shoppers are forecast to spend $707 each, up $61 on the average spend a year ago.
Prof Cavoli says adopting some financial literacy strategies, such as understanding day-to-day living expenses and living within your means can ensure people avoid unmanageable debt or financial mistakes as they head into the new year.
He says many resources are available to help individuals boost their financial literacy and secure long-term financial success.
“Programs like ASIC’s (Australian Securities and Investments Commission) MoneySmart highlight the importance of planning holiday expenses to avoid taking on too much debt,” Dr Arya says.
“Financial education programs often teach how to use price-comparison tools, helping consumers make better purchasing decisions and keep costs down.”
Be mindful of these common hidden costs that can undermine your holiday spending plan:
"Interest-free" payment plans: These may seem like a great deal, but they often come with conditions, such as fees for missed payments or high interest rates that kick in if you don't pay off the balance within the promotional period. Carefully read the terms and conditions before committing.
Festive season discounts: While discounts can help you save, they can also encourage overspending on items you don't need. Retailers often inflate prices before offering "discounts" to make the deal appear better than it is. Always compare prices and consider whether the purchase is genuinely necessary.
Buy-now-pay-later schemes: These can lead to accumulating debt if not managed properly. While they offer convenience, they can make it easier to lose track of your spending and result in financial strain if multiple payments pile up. Set a limit on how often you use these services and ensure you can afford the repayments.
Teach kids about money: Finally, teaching young children the difference between wants and needs is a foundational skill for developing financial literacy and good money habits.
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Contact for interview: Melissa Keogh, Communications Officer, UniSA M: +61 403 659 154 E: Melissa.Keogh@unisa.edu.au
Media contact: Professor Tony Cavoli, Professor of International Economics, UniSA Business E: Tony.Cavoli@unisa.edu.au
