It's that time of year again, when debt sneaks up as you hustle through the stores looking for Christmas gifts. Perhaps to stay on budget -- and make sure you give gifts that will be appreciated -- you decide to give cash instead. But does giving cash encourage financial irresponsibility and debt?

 

The answer? It depends on how and why you give money.

Giving cash isn't always a gift
Jeffrey Schwartz of Credit Counseling Services of Canada says that giving money isn't always a gift when it comes to learning lessons about managing money. For example, if the recipient has poor spending habits, cash might not be the best gift idea. "If the person has habits that really do need to change," says Schwartz, "giving them money to feed those habits will not help them to replace these habits with better ones."

Think of it in the same way as lending money repeatedly to friends or family members. If you keep giving them money, they'll expect it from you and not learn fiscal responsibility. In fact, that's a good way to judge whether it makes sense to give them money. If they ask you for money or never seem to have enough to cover their share of the bill when you go out together, then cash might not be the best gift idea.

Giving money as a teaching opportunity
But giving money doesn't always mean encouraging irresponsibility. You can use the gift to help the children in your life develop good money habits. Give them the money and let them spend it with the understanding that once it's spent, there's no more.

You can also sit with them and help them plan out how they're going to allocate the money. Or help them start a savings account with some of it, explaining (in simple terms, depending on age) about interest and saving for more-expensive items, and also show them how they can spend some of the money on fun things like a desired toy. That way they learn how to save and how to budget for something they want.

Giving money to stay on budget
Giving money doesn't just benefit the recipient. It can help you stay on budget, too. Take a look at your gift list and figure out how much each item might cost -- research online for good estimates. Instead of risking the budget with upsells, you might choose to give recipients the equivalent in cash. That way, everyone wins -- they can use the money as they see fit and you stay on budget.

Is giving money an appropriate gift?
Some people think that giving money as a gift is a little déclassé, as it can indicate that no thought was given to the gift or to the person receiving it. It can definitely be a sensitive issue, but the truth depends on the age of the recipient and, of course, your relationship with them.

Giving money to a teenager or young adult can be a good idea, especially if they're in a transitional stage of life such as graduating from or going to university. Giving money to a child, as mentioned above, can be a way to introduce the child to the concepts of saving and budgeting.

Holiday shopping is stressful and the search for the perfect gift can lead to debt. Giving money can be an easy way out, but how and why you give the money can be the best gift of all: financial responsibility.

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