Don’t waste money buying expensive gifts

Bad news: When your partner, friend, or sister said “You really shouldn’t have” on opening that expensive gift – they meant it.

You could have shopped smarter and saved your money instead.

Academics at the Stanford Graduate School of Business have shown that:

Most gift givers assume an expensive present is better appreciated…

…but in reality, gift receivers don’t appreciate expensive presents much more

It turns out it really is the thought that counts.

Hey big spender!

Years ago, when I was the first of my brothers and sisters to get a well-paid job, I spent far too much on Christmas presents.

Nothing that would turn the head of a Kardashian, mind.

But maybe a multi-piece Le Creuset set for the kitchen for my mum whereas before I’d have bought her a cookery book , or some fancy Bosch power tools instead of a Spear and Jackson spade for my dad.

But now I’m back on the good – cheaper – stuff.

That might sound like I’m simply older and meaner, but the problem wasn’t only that my more financially generous presents didn’t really any better appreciated, or that I was miffed when I got a novelty t-shirt in return. (Although with my head hung low, I’ll concede I was miffed).

The big issue was I bought bad presents because they had a bit more bling.

In truth, I was hiding my 20-something insecurities behind a price tag.

Worst of all, my sister pointedly told me that she felt my gifts made all her presents seem cheap.

Which wasn’t exactly the gift I was trying to give.

Or even if it was (subconsciously – because I was young and silly) then obviously it shouldn’t have been.

What matters when you give a present?

Happily we all grow up, and if we pay attention along the way we might even learn something.

Eventually I noticed that what really mattered to all of my family was whether we felt like we’d been thought of – and understood – when the gift was chosen.

One of my sisters also went through an ‘expensive presents with a new job’ phase, but now we’ve all settled down to giving smaller, more personal presents, which we can all afford to give, and that we’re usually pretty happy to receive.

Not before time, too, as nephews and nieces have entered the gift-buying equation. (Although honestly I’d much rather invest for them than contribute more plastic tat to landfill.)

Anyway, it turns out my family’s experience mirrors what academic researchers have discovered: More money spent does not equal more happiness.

How convenient!

1: Expensive engagement rings aren’t worth it

In one study, Stanford researchers looked at engagement rings – a one-off big ticket item where you might expect extra expenditure to pay dividends.

But in practice the researchers found:

Men consistently thought their rings were more appreciated by their fiancées the more expensive they were.

Fiancées did not rate themselves as any more appreciative if the rings were more costly.

Of course! Because while there’s a lot of marketing pressure on young romantics to prove their love at the jewelry store, the fact you’re asking someone to marry you is about as big a statement you can make.

2: More expensive birthday gifts aren’t more appreciated

In the second study, the Stanford researchers asked participants to think about a recent birthday gift:

Participants described a variety of gifts, including T-shirts, CDs, jewelry, wine, books, and home decor items. Again, those who were givers expected that more expensive gifts would make the recipients feel significantly higher levels of appreciation. In contrast, the recipients said they did not feel greater appreciation levels for gifts that had cost more.

Fact: It’s just not worth spending that extra chunk of cash. Researchers found givers would spend $100 on gifts that receivers would only pay $80 for. The excess $20 is a ‘deadweight loss’ in economic terms.

Now you know why those Christmas hampers are so overpriced.

If you see something the recipient would love that costs a little bit more and you can easily afford it, then sure – buy it.

Otherwise, this study is a green-light to cut 20% off your gift budget.

3. An iPod isn’t any more appreciated than a CD

This one did surprise me:

In the third study, participants were asked to think about giving or receiving either a CD or an iPod as a graduation present. Once again, those who were randomly assigned to be ‘givers’ thought by giving the more expensive iPod their present would be appreciated more in contrast to the CD. The ‘receivers’ rated no difference in appreciation levels, regardless of which item they were told to think about getting.

Perhaps the problem here is people are only being asked to imagine what it would feel like to receive a CD?

Because I can’t imagine someone would really be as happy to get this CD as this iPod (never mind this CD ).

I’m a geek though who a decade ago sold all his dying-format CDs for cash.

And now for the obligatory TED lecture

The good news is that giving is good for you, however much you spend, as this video from TED explains:

Hmm, maybe I should have created one of those Donate to Monevator buttons…

I could have made you all very happy!

Save money buying gifts

The message from academia is clear. Money doesn’t count for much when giving gifts, but thought and motivation matters.

Some suggestions:

Don’t feel guilty about setting a gift budget. You have to live within your means.

Put more time into choosing a gift that the recipient will really like.

If you believe you haven’t got enough time to shop for something special and so instead you’re reaching for a thermonuclear price tag to get you off the hook, think about how long it’d take you to earn the money you’d spend on that costly quick-fix gift. Like this you may ‘buy’ several hours, and hence a better, cheaper, and more appreciated present.

Try to make something happen – an experience or a one-off event – if you really want your gift to be remembered.

Happy giving !